Daily Analysis 07/10/2025

• GBP/USD Price: The GBP/USD pair retreated to around 1.3450 in early European trading on Tuesday, ending a two-day winning streak as renewed strength in the US Dollar capped the Pound’s upside momentum.
• BoE Outlook: The BoE’s August projections anticipated inflation to peak near 4% in September, but recent remarks from Deputy Governor Clare Lombardelli and MPC member Catherine Mann stressed that inflation shocks are not purely temporary, suggesting a more cautious policy outlook.
• Fed Commentary: Kansas City Fed President Jeffrey Schmid stated that the Fed must preserve inflation credibility, adding that current monetary policy remains appropriately tight. His comments lent modest support to the USD, limiting GBP/USD gains.
• Market Expectations: Money markets currently price in no further BoE rate hikes for 2025, as investors expect the central bank to hold rates steady amid a mix of stubborn inflation and resilient growth, reflecting a delicate balancing act for policymakers.
• Economic Data: The Halifax House Price Index fell 0.3% MoM in September, missing expectations of a 0.2% rise, with the average UK home price slipping to £298,184 — a sign that higher borrowing costs continue to weigh on the housing market.

Closing statement: GBP/USD edges lower as hawkish Fed remarks and BoE caution offset each other, while weak UK housing data adds pressure. The pair’s bias remains neutral-to-bearish, with resistance at 1.3500 and support near 1.3400.

• XAU/USD Price: Gold (XAU/USD) extended its record-breaking rally in early European trading on Monday, advancing toward the $4,000 per ounce mark, as persistent geopolitical and political uncertainties continued to fuel safe-haven demand.
• Political Developments: Concerns over a prolonged US government shutdown intensified after reports suggested the White House could initiate mass federal layoffs if negotiations between President Donald Trump and congressional Democrats fail, further weakening confidence in US fiscal stability.
• Data Delays: With key US macroeconomic releases delayed due to the shutdown, market participants are turning their attention to upcoming FOMC speeches for clues on policy direction. These remarks could generate short-term volatility in the USD and indirectly impact gold’s near-term trajectory.
• Geopolitical Tensions: President Trump’s warning to Israel and Hamas to “move fast” on the Gaza peace plan, or risk “massive bloodshed”, underscores elevated geopolitical risks, reinforcing demand for gold as a safe-haven asset.
• Institutional Outlook: Major banks are sharply revising upward their gold price forecasts: Goldman Sachs now sees $4,900/oz by December 2026, HSBC expects prices to surpass $4,000 in the near term, and Deutsche Bank has lifted its 2026 target to $4,000, all citing heightened political risk and strong institutional demand.

Closing statement: XAU/USD remains firmly bullish, supported by political uncertainty, delayed US data, and upgraded institutional forecasts. With momentum intact, gold appears poised to test the $4,000 psychological barrier in the near term.

• Crude Oil Price: West Texas Intermediate (WTI) oil prices extended their gains in early European trading on Tuesday, rising to $61.60 per barrel, slightly higher than Monday’s close. The modest advance reflects a balancing act between geopolitical supply disruptions and cautious global demand optimism.
• Refining Disruption: Ukraine’s drone strike on Russia’s Kirishi refinery has reportedly disabled the CDU-6 distillation unit, the largest at the site, removing a substantial portion of refining capacity from operation. This development could tighten regional fuel supply and lend supportive pressure to crude prices, pending official confirmation from Moscow.
• Expanded Conflict: In addition, Ukraine’s overnight attack on the Feodosia oil terminal in Crimea—a key transshipment and logistics hub—caused significant infrastructure damage, further straining Russia’s energy logistics. The combined strikes underscore heightened geopolitical risk in the energy market.
• Supply Disruption: A three-day national strike at Nigeria’s Dangote refinery, triggered by layoffs, has led to production losses of approximately 600,000 barrels, according to the national oil company. The event adds another temporary constraint to global supply, amplifying upward pressure on prices.
• Economic Outlook: The World Bank’s upgraded forecast for China’s 2025 GDP growth to 4.8% (from 4.0%) signals improving demand prospects in the world’s second-largest oil consumer. This positive revision offers a demand-side boost to the market sentiment for crude.

Closing statement: WTI crude remains supported by supply-side disruptions from Russia and Nigeria, coupled with improving Chinese demand expectations. With geopolitical risks rising and physical supply under stress, short-term bias leans bullish, though further gains may depend on sustained economic momentum from Asia.

• DAX Price: The DAX is trading modestly higher around 24,380 points on Tuesday, following a flat start to the week. Market sentiment appears steady yet cautious, with investors weighing weak economic data against a historically favorable fourth-quarter trend.
• Seasonal Outlook: According to HQ Trust analyst Jochen Morsch, the fourth quarter tends to be positive for the DAX, averaging a 4% gain historically. This seasonal optimism provides a psychological tailwind, even as short-term fundamentals remain mixed.
• Growth Downgrade: Deutsche Bank revised down its German GDP growth forecast for 2025 to 0.2%, from 0.5% previously, citing weaker-than-expected momentum despite fiscal reforms. The downgrade underscores persistent structural challenges in Europe’s largest economy.
• Industrial Weakness: Fresh data from the Federal Statistics Office showed factory orders fell 0.8% in August, marking a second consecutive monthly decline. The miss against expectations for a 1.4% rebound confirms continued manufacturing contraction and soft industrial demand.
• Policy Measures: Economy Minister Katherina Reiche announced a €6 billion decarbonization fund aimed at boosting industrial competitiveness through carbon capture and storage (CCS) technologies. The initiative signals Berlin’s commitment to combining climate policy with industrial renewal.

Closing statement: The DAX’s mild gains are supported by seasonal patterns and policy-driven optimism, but macro headwinds persist, led by weak factory data and downgraded growth projections. For now, momentum remains fragile, with upside potential dependent on signs of industrial stabilization.