Daily Analysis 05/03/2025

• GBP/USD Price: The GBP/USD pair remains steady around the 1.2800 level during European trading on Wednesday. The US Dollar is hovering near a three-month low as concerns about slowing US economic growth and fresh Chinese stimulus measures weigh on sentiment.
• BoE Governor: Bank of England (BoE) Governor Andrew Bailey stated that a renewed rise in inflation is not a major concern, signaling that policymakers may not be in a hurry to tighten monetary policy further.
• BoE Deputy Governor: Deputy Governor Dave Ramsden emphasized a “careful and gradual” approach to monetary policy, citing uncertainty in the labor market and global trade. This aligns with broader expectations of a patient stance from the BoE.
• UK Wage Growth: Elevated wage growth in the UK remains a key factor that could keep inflation stubbornly high. This supports the case for a more measured approach to monetary easing, delaying potential rate cuts from the BoE.
• US ISM Services: Investors are awaiting the US ISM Services PMI report for February, due later on Wednesday. A weaker-than-expected reading could further pressure the US Dollar, providing additional support for the Pound Sterling.

Closing statement: GBP/USD remains resilient, with the weaker USD and steady UK economic conditions providing support. The upcoming US ISM Services PMI will be a key factor in determining the next move for the pair.

• XAU/USD Price: Gold prices remain firm above the $2,900 mark early Wednesday, stabilizing after a two-day upswing from a three-week low of $2,833. The metal continues to attract safe-haven demand amid ongoing geopolitical and trade uncertainties.
• Trump Administration: After imposing a 25% tariff on imports from Canada and Mexico, US Commerce Secretary Howard Lutnick hinted at a possible policy shift, which President Trump is expected to announce on Wednesday. This uncertainty adds to market volatility, benefiting gold.
• Retaliatory Tariffs: Canada confirmed retaliatory tariffs on US imports, while China’s Commerce Ministry announced additional tariffs of up to 15% on key US agricultural products. Rising trade tensions continue to fuel investor demand for gold as a hedge against economic instability.
• Military Aid to Ukraine: Gold gained further support after reports that the US has paused all military aid shipments to Ukraine. Bloomberg cited a defense official stating that weapons and equipment in transit, including those in Poland, have been grounded, heightening geopolitical risks.
• US Data: The ISM Manufacturing PMI for February slipped to 50.3 from January’s 50.9, signaling a slowdown in economic activity. Meanwhile, the Prices Paid Index surged to a nearly three-year high, reflecting inflationary concerns linked to new import tariffs.

Closing statement: Gold remains well-supported above $2,900, driven by safe-haven demand amid trade tensions, geopolitical uncertainty, and inflation fears. Investors will be closely watching any further developments on US tariff policies and economic data for the next directional move.

• WTI Oil Price: West Texas Intermediate (WTI) crude oil is trading around $68.05 during early European hours on Wednesday, as investors assess supply dynamics and trade-related risks.
• OPEC+ Production: The Organization of the Petroleum Exporting Countries and its allies (OPEC+) reaffirmed plans to increase oil production from April, following a series of earlier output cuts aimed at stabilizing prices. The decision raises concerns about oversupply in the market.
• US Crude Inventories: The American Petroleum Institute (API) reported that US crude stockpiles fell by 1.455 million barrels in the week ending February 28, surpassing expectations. A larger-than-anticipated inventory draw typically signals stronger demand, offering some support to oil prices.
• US Growth Projections: The Atlanta Fed’s GDPNow model forecasts a 2.8% contraction in US GDP for Q1, reflecting economic uncertainty. Slower growth could weaken energy demand, putting downward pressure on crude prices.
• Trade Uncertainty: The Trump administration’s new tariff measures have intensified concerns about economic stability in the US, the world’s largest oil consumer. Rising trade barriers may slow economic growth, reduce employment, and increase inflation, ultimately impacting fuel consumption.

Closing statement: WTI remains under pressure amid concerns over trade policies and slowing economic growth, despite a draw in US crude inventories. Investors will closely monitor further trade developments and upcoming economic data for directional cues.

• DAX Price: The German DAX index is set to continue its upward momentum on Wednesday after recent fluctuations. On Monday, the index surpassed the 23,000-point mark for the first time, reflecting strong market optimism.
• US Tariffs: The ongoing tariff disputes between the US and key trading partners—including China, Mexico, and Canada—have contributed to market uncertainty and profit-taking. These tariffs are impacting the German economy and disrupting global trade dynamics.
• Defense Spending: A major financial stimulus plan was introduced by Germany’s CDU/CSU and SPD, including a historic €500 billion fund for infrastructure development. The package also increases defense spending, potentially boosting industrial and defense-related stocks.
• US-Ukraine Diplomacy: Tensions between US President Donald Trump and Ukrainian President Volodymyr Zelenskyi appear to be easing after a recent diplomatic dispute. This could contribute to a more stable geopolitical outlook, benefiting investor sentiment.
• US Earnings Season: The US corporate earnings season has been solid, with 75% of companies exceeding expectations. This has provided a positive backdrop for global equities, including the DAX, as investors remain optimistic about corporate resilience.

Closing statement: Despite global trade tensions, DAX remains on a bullish trajectory, supported by strong earnings and a historic domestic investment package. Investors will closely monitor further developments in US-EU trade relations and geopolitical events.