Daily Analysis 08/12/2025

• GBP/USD Price: GBP/USD begins the week in a subdued tone, holding a tight range above 1.3300 during Monday’s European session.
• PM Starmer: UK Prime Minister Keir Starmer reiterated the need to lower inflation and interest rates to support business investment and overall economic growth.
• Cut Expectations: Markets widely anticipate a 25 bps BoE rate cut to 3.75% on December 18, driven by signs of a cooling UK labor market.
• BoE's Taylor: With no significant data releases on Monday, traders will look to remarks from BoE MPC member Alan Taylor for short-term direction.
• US Sentiment: The latest University of Michigan survey showed easing inflation expectations, with 1-year projections down to 4.1% and 5-year expectations falling to 3.2%.

Closing statement: GBP/USD may remain range-bound in the near term, with direction hinging on BoE commentary and broader USD sentiment following softer US inflation expectations.

• XAU/USD Price: XAU/USD finds dip-buying support early in the week, halting Friday’s pullback from the $4,260 zone and stabilizing near multi-week highs.
• PCE Number: US September PCE inflation came in broadly as expected, with core services momentum easing slightly to 0.2% m/m, reinforcing the narrative of cooling underlying inflation.
• Fed Bets: Markets assign nearly a 90% probability to a Fed rate cut this week, with expectations building for an additional cut by April, supporting non-yielding gold.
• US Strategy: President Trump’s newly unveiled National Security Strategy, focused on reinforcing US hemispheric dominance and countering China, adds a geopolitical layer that can sustain safe-haven demand.
• China Data: China’s November exports rose 5.9% y/y, beating expectations as shipments to non-US markets offset tariff pressures, signalling improving external demand.

Closing statement: Gold remains well-supported as easing inflation, dovish Fed expectations, and persistent geopolitical themes maintain a favorable backdrop for upside stability.

• Crude Oil Price: WTI crude edges higher toward $60 per barrel to start the week, extending Friday’s momentum and reflecting a mildly improved risk tone in early European trading.
• Peace Hopes: US Envoy Kellogg signaled that a Russia-Ukraine breakthrough is “really close,” though key sticking points such as Donbas and the Zaporizhzhia plant remain unresolved, keeping geopolitical risk priced into energy markets.
• Kremlin Pushback: Russia’s demand for major revisions to US proposals highlights persistent negotiation hurdles, while Zelensky’s meeting with EU leaders aims to secure stronger guarantees, contributing to lingering uncertainty around supply risks.
• Asia Tensions: Japan-China relations deteriorated after Chinese jets allegedly locked radar on Japanese aircraft near Okinawa, prompting a formal protest by Tokyo and raising concerns over security in a key trade corridor.
• SE Asia Conflict: Thailand’s airstrikes on Cambodia mark a breakdown of the Trump-brokered peace deal, with regional governments urging restraint as border tensions flare, adding another layer of geopolitical volatility.

Closing statement: WTI remains supported above $60 as geopolitical tensions across Europe and Asia offset demand concerns, leaving the near-term bias slightly tilted to the upside.

• DAX Price: The index is trading around 24,040 points, showing little movement as markets digest mixed macro headlines and geopolitical developments.
• Industrial Output: Germany’s industrial sector surprised to the upside, with October Industrial Production rising 1.8% MoM, indicating a short-term rebound in the Eurozone’s largest economy despite persistent structural challenges.
• Rare Earths: Markets remain cautious as there is still no confirmed agreement on rare earths cooperation between the U.S. and China, despite earlier expectations from Treasury Secretary Bessent for a deal by Thanksgiving.
• Geopolitical tensions: Russia launched a large-scale missile and drone attack on Ukrainian energy infrastructure, raising concerns about energy security and adding a layer of geopolitical risk to European markets.
• France Signals: President Macron indicated that France may impose tariffs on Chinese goods “in the coming months”, hinting at a more protectionist EU stance and drawing parallels to the ongoing U.S.–China trade tensions.

Closing statement: The DAX remains flat as investors balance improving domestic data with persistent geopolitical and trade-related risks. Near-term direction will likely depend on developments in EU–China relations and broader global risk sentiment.