Daily Analysis 14/02/2025

• GBP/USD Price: GBP/USD trades on the front foot, maintaining levels above 1.2570 in the early European session on Friday. The pair gains as the US Dollar consolidates recent losses and risk sentiment improves, providing support for the Pound Sterling.
• US Dollar: The US Dollar Index (DXY) hovers around 107.00, while 2-year and 10-year US Treasury yields stand at 4.31% and 4.53%, respectively. Stable yields and mild risk-on sentiment have kept the greenback from gaining significant momentum.
• UK GDP: The UK economy grew by 0.1% in Q4 2024, defying predictions of a 0.1% decline. December’s GDP rose by 0.4% month-on-month (MoM), compared to 0.1% growth in November, signaling resilience in the UK economy despite ongoing uncertainty.
• BoE's Tone: Bank of England (BoE) officials continue to express caution regarding potential interest rate cuts. Persistent inflationary pressure remains a concern, prompting policymakers to adopt a wait-and-see approach before easing monetary policy.
• US Retail Sales: Investors now await the US Retail Sales report, which could influence market direction. Expectations point to a -0.1% monthly contraction in January, following a 0.4% increase in the previous month. A weaker reading could weigh on the US Dollar and support GBP/USD.

Closing statement: GBP/USD remains well-positioned, benefiting from upbeat UK economic data and a softer US Dollar. However, market participants will closely watch the US Retail Sales release for fresh impetus and potential near-term volatility in the pair.

• XAU/USD Price: Gold edges higher during early European trading hours on Friday. Technical indicators suggest a potential brief pullback toward the rising trendline support at $2,892 before resuming its upward momentum.
• FED Rate Cut: Following stronger-than-expected US PPI data, futures markets now price in 31 basis points (bps) of easing by year-end, up from 27 bps on Wednesday. The next rate reduction is anticipated at either the Federal Reserve’s October or December meeting, which continues to support gold prices.
• Russia-Ukraine Negotiations: In a social media post, US President Trump mentioned a "lengthy and highly productive" phone call with Russian President Vladimir Putin to initiate peace negotiations for the Russia-Ukraine conflict. Meanwhile, the Kremlin confirmed that both sides are open to dialogue and a possible settlement.
• Profit-Taking: As gold trades near record highs, market participants may engage in profit-taking ahead of the long weekend, potentially triggering a short-term pullback. This could offer traders an opportunity to re-enter at lower levels.
• Focus Shift: Fresh updates on Trump’s reciprocal tariff strategy and broader geopolitical developments will play a key role in determining the gold price trajectory in the coming sessions.

Closing statement: Gold remains well-supported by geopolitical tensions and dovish rate expectations, but a short-term correction is likely as traders lock in profits. Any breakthrough in Russia-Ukraine negotiations or surprise announcements from Trump could drive significant volatility.

• WTI Oil Price: West Texas Intermediate (WTI) crude trades near $71.60 during the early European session on Friday. The price remains resilient despite recent volatility, supported by improving demand prospects and a relatively smaller-than-expected inventory build.
• Trump’s Tariff Plans: US President Donald Trump instructed his administration to explore reciprocal tariffs on countries that impose duties on US goods. The study will be completed by April 1, which leaves markets cautious about potential impacts on global trade and oil demand.
• India-US Trading: Indian Prime Minister Narendra Modi announced a "mega partnership" with the US, securing a deal for increased imports of American oil and gas. This agreement is seen as a positive development for US energy exports and could strengthen demand for WTI crude.
• US Crude Inventories: The US Energy Information Administration (EIA) reported a crude inventory increase of 4.07 million barrels for the week ending February 7, a significant slowdown from the previous week’s 8.66 million-barrel rise. This smaller build tempers immediate concerns about oversupply.
• Russia-Ukraine Negotiations: Optimism surrounding a potential peace deal between Russia and Ukraine might limit crude oil’s upward momentum. Trump’s recent calls with Russian President Putin and Ukrainian President Zelenskiy highlighted both leaders’ interest in resolving the conflict, easing concerns about prolonged geopolitical risk.

Closing statement: WTI remains supported by improving global demand and geopolitical optimism, but inventory builds and uncertainty around US tariff policies could cap gains. Any progress in US-India energy deals or Russia-Ukraine peace talks will play a crucial role in shaping oil prices in the near term.

• DAX Price: The DAX surged 2.09% on Thursday, following a 0.50% gain on Wednesday, closing at a new all-time high of 22,612. The index remains well above its 50-day and 200-day Exponential Moving Averages (EMAs), signaling a strong bullish trend that continues to attract buyers.
• Hopes for Peace: Comments from US President Donald Trump on the potential end of the Ukraine war boosted investor confidence. Trump’s phone conversations with Russian President Putin and Ukrainian President Zelenskyy sparked optimism for a peaceful resolution, driving risk-on sentiment.
• Corporate Earnings: Robust earnings reports and positive forward guidance lifted the DAX. Siemens AG posted impressive Q1 profits, soaring 7.26%. The auto sector followed closely, with Volkswagen (+6.44%), BMW (+6.06%), Mercedes-Benz Group (+5.40%), and Porsche (+4.50%) contributing significantly to the DAX’s rally.
• German Inflation: Germany’s annual inflation rate fell from 2.6% in December to 2.3% in January, raising hopes for potential ECB rate cuts to stimulate growth. Although inflation remains above the European Central Bank’s 2% target, the drop signals progress in taming price pressures.
• German Wholesale Data: On Friday, the release of German wholesale price data will be closely watched for clues on the ECB’s future monetary policy. Economists expect a modest 0.1% year-on-year increase in January, matching December’s figure.

Closing statement: The DAX’s breakout to new highs reflects improving corporate performance and optimism about peace talks in Ukraine. If wholesale prices remain subdued, it could strengthen the case for ECB easing, providing further support for the German index.