Daily Analysis 20/08/2025

• GBP/USD Price: GBP/USD is trading near 1.3500 in European hours on Tuesday, pressured by position adjustments supporting the USD.
• UK Inflation: The UK’s July CPI rose 3.8% YoY, slightly above June’s 3.6%, signaling persistent inflation pressures. This supports expectations the Bank of England may stay cautious on rate policy.
• Geopolitical Developments: US President signaled that Washington will support Europe with Ukraine security guarantees, with hopes of a future trilateral Trump-Putin-Zelenskyy summit. This may provide some stability sentiment for GBP, though impact remains limited.
• Fed Policy: Fed Governor Bowman reiterated her support for rate cuts, consistent with her July vote. However, markets remain cautious as diverging Fed views limit USD downside.
• Powell Speech: Traders await Powell’s Friday speech for clarity on September policy moves. Any pushback against rate cut expectations could strengthen USD and add downward pressure on GBP/USD.

Closing statement: GBP/USD remains soft, balancing UK inflation resilience with USD strength from Fed policy uncertainty. Near-term direction hinges on Powell’s guidance and market repricing of US rate expectations.

• XAU/USD Price: Gold extends losses, dropping to three-week lows near $3,320/oz, as selling pressure accelerates.
• US Data: July housing starts rose to 1.428m vs 1.290m expected, reinforcing US economic resilience. This raises concerns that aggressive Fed rate cuts could risk fueling stronger growth and inflationary pressure.
• Fed Policy: Markets still anticipate a September Fed rate cut, but the probability of a 50bps move has faded post-CPI. July’s PPI data unsettled investors, keeping alive the risk of no immediate policy change.
• Geopolitical Angle: China prepares to showcase hypersonic weapons at a major military parade, highlighting rising global geopolitical tensions that could act as a long-term floor for gold demand.
• Key Events: Traders eye the FOMC meeting minutes on Wednesday and the Jackson Hole Symposium, with Fed guidance set to drive gold’s next directional move.

Closing statement: Gold trades heavy near $3,320 as resilient US data and shifting Fed expectations weigh on prices. Geopolitical risks provide some support, but the short-term bias remains bearish until Fed clarity emerges.

• Crude Oil Price: West Texas Intermediate (WTI) crude edges higher to $62.10 per barrel in early European trading on Wednesday, recovering slightly from recent levels.
• API Report: The API reported a 2.4M barrel drawdown in US crude stocks, beating expectations and signaling stronger demand. This follows the prior week’s unexpected 1.5M barrel build, supporting near-term price momentum.
• China Demand: China’s Premier Li Qiang urged more measures to boost consumption and investment, reinforcing expectations of stimulus. This could underpin demand for crude from the world’s largest importer.
• Geopolitical Factor: Markets track developments toward a potential Ukraine ceasefire, which could ease restrictions on Russian exports. While Russia has kept oil largely flowing, any deal might weigh on crude prices via supply relief.
• Key Data: Attention shifts to the EIA’s official weekly oil report, due later Wednesday, for confirmation of inventory trends and supply-demand dynamics.

Closing statement: Crude oil prices are supported by bullish API data and Chinese policy signals, but geopolitical headlines and the EIA report will determine whether the current upside can extend or faces renewed pressure.

• DAX Price: The DAX rose 0.45% on Tuesday to 24,423, marking a three-week high and reversing Monday’s modest 0.18% pullback.
• German PPI: Germany’s July PPI fell -0.1% m/m vs +0.1% expected, with core PPI (ex-energy) slipping -0.2%. The softer producer prices reinforce expectations of subdued inflationary pressures.
• Sector Movers: Hopes of a Ukraine peace deal fueled gains in consumer discretionary and autos, with Zalando +3.68% and Mercedes-Benz +2.61% leading advances.
• Sector Laggards: Energy and defense stocks fell as oil prices slipped and outlook for military spending softened. Rheinmetall -4.85% and Siemens Energy -2.42% were notable laggards.
• Market Outlook: Traders await FOMC speeches later Wednesday, which could influence risk sentiment. Signals favoring a September Fed rate cut may further support the DAX into week’s end.

Closing statement: The DAX rally reflects a blend of easing inflation pressures and geopolitical optimism, though sector rotation shows energy and defense headwinds. The Fed’s policy cues remain the key near-term driver for further upside.