Daily Analysis 10/09/2025

• GBP/USD Price: GBP/USD trades around 1.3530, showing mild gains on Wednesday but remains under pressure from a stronger US Dollar. The pair is struggling to extend upside momentum as dollar strength dominates flows.
• UK-China Trade: The UK is set to hold its first trade talks with China in seven years, led by new Business and Trade Secretary Peter Kyle. London seeks greater access for British firms to the Chinese market, highlighting renewed focus on external trade opportunities.
• Fiscal Policy: Ahead of the Autumn Budget, Chancellor Rachel Reeves called for tighter control of inflation and public spending, aligning fiscal discipline with BoE policy. Fiscal caution is weighing on sentiment, as investors assess potential growth trade-offs.
• Political Consolidation: PM Keir Starmer has created a new “Budget board” linking top ministers and Treasury officials. The move strengthens centralized control over economic strategy, aiming to deliver growth while preventing conflicts with the business community.
• US Data: The NFIB Small Business Optimism Index came in at 100.8 vs. 101.0 expected, a marginal miss. While the impact is limited, it reinforces resilience in the US economy, lending support to the Dollar and indirectly capping GBP/USD gains.

Closing statement: With dollar strength, fiscal caution in the UK, and political restructuring, GBP/USD faces downside risks despite near-term resilience. Unless trade talks with China or the UK’s budget planning deliver a confidence boost, the pair risks drifting back toward 1.3450 support.

• XAU/USD Price: Gold (XAU/USD) surged to a new all-time high near $3,675 on Tuesday before giving up most intraday gains. The pullback reflects profit-taking and cautious positioning ahead of key US inflation data releases.
• Fed Independence: A US federal judge ruled against President Trump’s attempt to remove Fed Governor Lisa Cook, keeping her in office for now. This preserves Fed independence and ensures Cook’s participation in the September policy meeting, which could impact forward guidance.
• Business Sentiment: The NFIB survey showed a slight uptick in optimism, with stronger sales expectations and improved earnings. However, persistent labor quality issues highlight ongoing challenges for small businesses, tempering broader confidence.
• China Inflation: China’s August CPI slipped back into deflation at -0.4% y/y, raising concerns over demand weakness. However, core CPI accelerated modestly to 0.9%, signaling that underlying price pressures are gradually stabilizing.
• US Data: The August PPI release is due today, drawing extra attention as it precedes CPI and follows July’s upside surprise. Stronger-than-expected figures could reinforce Fed caution, while a softer print may support gold through lower yield expectations.

Closing statement: Gold’s record-setting rally reflects a mix of Fed policy uncertainty, deflation fears in China, and cautious investor sentiment ahead of critical US inflation data. Near-term momentum hinges on PPI/CPI outcomes.

• Crude Oil Price: WTI crude oil trades near $63.00 per barrel, extending gains from Tuesday’s $62.52 close. The upward momentum reflects improving sentiment, though markets remain sensitive to supply and geopolitical headlines.
• US Stockpiles: The API reported a 1.25 million barrel build in US crude inventories for the week ending August 29, larger than the prior week’s 622,000-barrel rise. Year-to-date, stockpiles are up 8.7 million barrels, raising concerns about excess supply.
• Sanctions Risk: President Trump signaled readiness for a “second phase” of sanctions against Russia, while the EU prepares its 19th sanctions package. Coordinated measures could tighten global supply, offsetting bearish stockpile data.
• Middle East: Tensions escalated as Israel launched an attack on Hamas in Qatar, sparking widespread condemnation. While the White House criticized the strike’s strategic value, renewed instability in the region underscores persistent geopolitical risk for energy markets.
• EIA Report: Traders now await the EIA’s weekly crude oil stock data later today. A significant build could pressure prices, while a surprise drawdown may reinforce WTI’s push above $63.

Closing statement: Oil markets balance between bearish inventory builds and bullish geopolitical risks, with traders eyeing the EIA report for confirmation. Short-term direction hinges on whether sanctions and Middle East tensions outweigh the supply overhang.

• DAX Price: The DAX edged higher by 0.12% to around 23,830 points, recovering modestly after a weaker session on Monday. The index continues to reflect global uncertainty and choppy trading patterns.
• Labor Market: Eurostat data highlighted Germany’s shorter workweek of about 34 hours compared to the EU average of 36, France, and Greece. With labor productivity flat since 2009, structural issues in the workforce raise questions about Germany’s long-term competitiveness.
• Auto Sector: At the Munich car show, Chancellor Friedrich Merz pledged backing for the German auto industry, emphasizing the need for innovation to counter competitive threats from China and the US while calling for reduced regulatory burdens.
• Tariff Pressures: President Trump pushed the EU to impose 100% tariffs on Chinese and Indian goods as part of a broader strategy to pressure Russia. Such measures could spark trade tensions, weighing on European exporters and equity sentiment.
• Geopolitical Tensions: Poland confirmed that “hostile objects” were downed during a Russian attack on Ukraine, raising NATO alert levels. Heightened security risks in Eastern Europe add another layer of uncertainty for investor sentiment in the region.

Closing statement: The DAX remains caught between domestic structural weaknesses, external trade risks, and geopolitical shocks. While sector-specific support, especially for autos, is a positive, broader risks keep volatility elevated.