Daily Analysis 06/05/2025

• GBP/USD Price: After previous session gains, GBP/USD trades around 1.3300 on Tuesday in Europe but shows limited upward drive, as technical indicators reflect muted buyer interest.
• Technical Outlook: The Relative Strength Index (RSI) near 40 and the pair’s position below key SMAs (20, 50, and 100-period) on the 4-hour chart point to continued bearish pressure, suggesting any rallies may be short-lived without fundamental support.
• Fed Chair: While the Fed is expected to keep interest rates unchanged, investor focus shifts to Chair Powell’s post-decision commentary, which could influence USD strength and, by extension, GBP/USD direction.
• BoE Rate Cut: Markets widely anticipate the BoE will cut rates by 25 basis points on Thursday, with a 9-1 MPC vote expected, reinforcing a dovish outlook and weighing on the British Pound.
• Trump-Carney Meeting: The scheduled meeting between President Trump and Canadian PM Carney introduces a fresh layer of geopolitical and trade uncertainty, which could spill over into FX markets depending on outcomes.

Closing statement: GBP/USD remains technically weak despite stabilizing near 1.3300. The BoE’s expected rate cut and Fed Chair Powell’s remarks will be pivotal, with any surprises potentially triggering volatile swings in the pair.

• XAU/USD Price: XAU/USD climbs for the second consecutive day, supported by persistent bearish sentiment toward the US Dollar, as investors increase exposure to safe-haven assets.
• Trump Hints: US President Donald Trump suggested imminent trade agreements and showed openness to reducing tariffs on China, easing market concerns and modestly limiting gold’s upside.
• ISM Services: April’s US ISM Services PMI rose to 51.6, reflecting improvements in new orders, employment, and supplier deliveries. This marks a positive shift in economic momentum, which may temper gold's appeal if USD sentiment rebounds.
• Fed News: WSJ’s Nick Timiraos reported divisions within the Fed on when to initiate rate cuts. Markets interpret this as a sign of potential policy caution, supporting gold as a hedge against uncertainty.
• Russia-Ukraine Tensions: Fresh drone attacks on Moscow and Ukrainian advances in Russia's Kursk region raise geopolitical tensions, boosting demand for gold as a traditional safe-haven asset.

Closing statement: Gold's bullish momentum is underpinned by USD weakness, geopolitical risks, and Fed uncertainty. However, any easing in trade tensions or stronger US data could limit gains, making $3,250 a key level to monitor for bullish continuation.

• Crude Oil Price: WTI crude oil hovers around $58.40, rebounding from a nearly 2% drop seen at the start of the week. The recovery reflects cautious optimism amid a complex supply and geopolitical backdrop.
• OPEC+ News: Reports indicate that OPEC+ may fully reverse voluntary cuts by October, with Saudi Arabia pressuring the bloc to enforce stricter compliance. Iraq and Kazakhstan's repeated overproduction is drawing increasing scrutiny.
• Global Inventories: Since mid-February, global crude stockpiles have swelled by 150 million barrels, suggesting that demand is lagging or that supply remains too high despite prior OPEC+ curbs.
• Trade Talks: China’s Commerce Ministry said it is evaluating US trade talks, a move that injects some demand optimism into the oil markets, though tangible outcomes remain elusive.
• Geopolitical Risks: Israel, reportedly with US backing, struck Yemen’s Hodeidah port in response to a Houthi missile attack on Tel Aviv’s airport, reintroducing supply disruption concerns in the oil-rich Middle East.

Closing statement: WTI oil’s path remains volatile, caught between rising inventories, intra-OPEC tensions, and simmering geopolitical risks. A sustained rally likely hinges on clear progress in US-China trade talks and tighter OPEC+ discipline, with upside resistance near $58.50 in focus.

• DAX Price: The DAX climbed 1.1%, positioning itself just one session away from breaking its March all-time high, fully recovering from the 20% decline linked to US President Trump's Liberation Day policies.
• Merz’s Appointment: The election of Friedrich Merz as German Chancellor has fueled market optimism. His large-scale investment plan is seen as a catalyst for DAX outperformance and potential record-breaking gains.
• US Pharma Tariff: President Trump’s upcoming pharmaceutical tariffs, expected within two weeks, follow an executive order to promote domestic drug production, stirring supply chain concerns for European healthcare stocks.
• EU Plans: The European Commission will announce a ban on spot Russian gas contracts by year-end and aims to end long-term gas contracts by 2027, a move that could reshape industrial energy costs and impact DAX-listed manufacturers.
• Chinese Services: China’s Caixin Services PMI dropped to 50.7, its lowest in seven months, pointing to sluggish post-COVID recovery. This has implications for German exporters heavily reliant on Chinese demand.

Closing statement: The DAX is benefiting from domestic political clarity, fiscal optimism, and global investor confidence, but remains vulnerable to external risks from US trade actions and slowing Chinese growth. A break above its all-time high appears likely if momentum holds, with 23,400 as the next upside target.