Daily Analysis 10/12/2024

• GBP/USD Price: GBP/USD regains momentum above the 1.2750 level in Tuesday's European session, benefiting from improved risk sentiment driven by hopes for Chinese stimulus and a softer US Dollar.
• BoE's Dhingra: Bank of England (BoE) policymaker Swati Dhingra highlighted the strain of high interest rates on the UK economy, noting their negative impact on consumer spending and business investment.
• Deputy Governor: Deputy Governor Sir Dave Ramsden emphasized the need for vigilance amid economic uncertainty regarding the UK’s economic outlook.
• NY Fed Survey: The Federal Reserve Bank of New York’s latest consumer survey revealed cautious economic expectations among US consumers. This adds uncertainty to the broader narrative of Fed rate cuts expected later this month.
• Thin US Economic Calendar: With a light economic calendar early in the week, market participants are keenly awaiting Wednesday's US Consumer Price Index (CPI) report, which will provide fresh cues on inflation trends and guide Fed policy expectations.

Closing statement: While GBP/USD gains from global optimism and USD weakness, domestic challenges and Fed developments could limit upside potential. Traders should closely watch the upcoming US CPI data and BoE commentary for directional clues.

• Gold Rebounds: The price of gold has climbed back toward its recent highs, buoyed by supportive market conditions. Safe-haven demand and central bank activity are key contributors to the precious metal’s recovery.
• Geopolitical Unrest: The sudden collapse of the Syrian government has intensified geopolitical tensions in the Middle East, driving investors toward gold as a safe-haven asset. The ongoing uncertainty sustains bullish sentiment for the commodity.
• China Gold Purchases: The People’s Bank of China’s announcement of a 160,000-ounce gold purchase in November, following a six-month hiatus, has provided additional support to bullion prices by signaling renewed demand from a major buyer.
• Fed Rate Cut: Markets are pricing in an 86% probability of a 25-basis-point Fed rate cut at next week’s meeting. While the odds for a January cut remain lower at 22%, expectations of easing monetary policy contribute to gold’s attractiveness.
• US CPI Data: Traders are cautiously awaiting Wednesday’s US Consumer Price Index (CPI) report, which could significantly impact gold’s trajectory. Ahead of this key inflation data, some repositioning and profit-taking activity is expected.

Closing statement: Gold remains well-supported by geopolitical uncertainty, central bank demand, and expectations of Fed rate cuts. However, short-term volatility tied to upcoming US CPI data could shape its immediate trajectory.

• WTI Price: West Texas Intermediate (WTI) crude oil prices exhibit resilience at the start of the week, trading just under the $67 mark. Early buying interest highlights support amid mixed market influences.
• US Outlook: Indications of US economic strength, combined with optimism surrounding President-elect Donald Trump's anticipated expansionary policies, bolster expectations for increased fuel demand, lending support to oil prices.
• China's Monetary Policy: The Chinese Politburo's shift to a "moderately loose" monetary policy—the strongest easing signal since the 2008 Global Financial Crisis—has fueled hopes for economic recovery in the world’s largest crude importer.
• Geopolitical Risks: Heightened geopolitical tensions, driven by the Russia-Ukraine war and the recent overthrow of Syria's government, maintain a risk premium on crude oil. These events contribute to supply uncertainty and support prices.
• Druzhba Pipeline: Oil supplies through the Druzhba pipeline to the Czech Republic have resumed, mitigating some supply concerns. However, broader geopolitical risks and production adjustments continue to influence market dynamics.

Closing statement: Crude oil prices remain supported by US economic resilience, Chinese policy shifts, and geopolitical risk factors. However, market participants will closely monitor supply developments and policy moves for clearer directional cues.

• DAX Price: The DAX declined by 0.19% on Monday, breaking its seven-day winning streak despite hitting a record high of 20,462 earlier in the session. Profit-taking amid cautious sentiment contributed to the reversal.
• Auto Stocks: Auto sector stocks continued their rally, with Mercedes Benz Group leading gains at 3.24%, followed by BMW (+2.54%). Porsche and Volkswagen also posted solid increases, supported by optimism over European industrial recovery.
• China Trade: China’s November trade data revealed export growth slowed to 6.7% year-on-year, down from 12.7% in October, pointing to weaker global demand. This dampened investor sentiment and raised concerns about the European export market.
• German Inflation: Germany’s finalized November inflation rate held at 2.2% year-on-year, slightly above October's 2.0%. While aligned with preliminary estimates, it underscores persistent price pressures in Europe’s largest economy.
• US Consumer Optimism: The New York Fed’s Survey of Consumer Expectations showed US inflation expectations rose to 3.0% in November from 2.9% in October. This improvement in sentiment could influence the global investment climate, particularly in equities.

Closing statement: The DAX’s recent pullback reflects profit-taking and concerns over slowing global demand, notably from China. However, robust performance in the auto sector and stable inflation data suggest resilience in Germany’s industrial base. Investors will closely watch upcoming US and European economic indicators for further guidance.