Daily Analysis 23/06/2025

• GBP/USD Price: The GBP/USD pair maintains its rebound, trading steadily above the 1.3400 level during the European session on Monday. The modest strength comes despite growing speculation over further rate cuts from the Bank of England.
• BoE Signals: At its June policy meeting, the Bank of England left its key rate unchanged at 4.25%, aligning with expectations. Governor Andrew Bailey reiterated a gradual easing trajectory, yet warned of high global unpredictability, tempering investor enthusiasm.
• UK Retail Sales: May’s Retail Sales fell sharply by 2.7% MoM, a steep reversal from April’s 1.3% rise (revised up). The data amplified expectations that the BoE may cut rates as soon as August, with an additional 25 bps cut seen likely by year-end.
• Reuters Outlook: A Reuters poll of economists suggests broad agreement that two rate cuts are likely in 2025’s second half, reflecting increasing concern over UK consumer demand and broader economic momentum.
• PMI Data: Traders now look to June preliminary PMI data from both the UK and US, which could shift market tone. Strong UK figures may ease pressure on the BoE, while weak US data could weigh further on the USD.

Closing statement: While GBP/USD shows resilience above 1.3400, the pair remains vulnerable to economic data shocks. BoE’s cautious tone and poor retail figures support dovish expectations, but PMI data could tip short-term sentiment in either direction.

• XAU/USD Price: Gold prices retreat after an early uptick in Asian trading, facing fresh selling pressure around the $3,400 level. Market sentiment is cautious, as modest US Dollar strength and a hawkish Fed stance dampen demand for the precious metal.
• Geopolitical Tensions: Despite previous anti-intervention rhetoric, US President Donald Trump ordered airstrikes on three nuclear sites in Iran, fueling geopolitical uncertainty. However, the safe-haven bid for gold remains subdued, possibly due to expectations of limited escalation.
• Fed Projections: While the Federal Reserve signaled two rate cuts in 2025, officials now expect only one 25 bps cut in both 2026 and 2027, citing inflation concerns tied to Trump’s proposed tariffs. This slower policy easing outlook is weighing on gold’s appeal.
• Global PMI Data: Traders are now eyeing preliminary S&P Global PMI data from both the Eurozone and the US, which will be key to assessing the global growth outlook. Weak prints may revive interest in gold as a defensive asset.
• Fed Speakers: Upcoming speeches from Fed officials will be carefully watched for clues on the future policy path, especially in light of last week’s "hawkish hold". Any deviation from the expected path could trigger volatility in gold markets.

Closing statement: Gold is struggling to maintain bullish momentum despite geopolitical risks, as Fed hawkishness and a resilient USD cap upside. A clearer direction may emerge following PMI data and Fed commentary, but near-term sentiment remains fragile below $3,400.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil is trading near $74.60 during European hours on Monday as geopolitical tensions intensify. The price gains reflect investor concern over potential disruptions to global oil supply following fresh conflict developments.
• US Airstrikes: In a dramatic turn in the Iran-Israel conflict, the US launched airstrikes on Iranian nuclear facilities in Fordo, Natanz, and Isfahan. Iran’s Foreign Minister declared readiness to defend against both US and Israeli military actions, raising fears of a broader regional war.
• Strait of Hormuz: Iran’s parliament voted to close the Strait of Hormuz, a critical chokepoint through which ~20% of global oil flows. If enforced, this could severely disrupt supply. JP Morgan analysts warn that oil prices could spike to $130 in a prolonged conflict scenario.
• Trump's Warning: President Trump reinforced a hardline stance, warning Iran of massive retaliation if it responds militarily. His comment—"there will either be peace or tragedy"—highlights the binary and volatile path markets face regarding oil and broader risk sentiment.
• Demand Forecast: Despite the geopolitical premium, the International Energy Agency (IEA) revised global oil demand down by 20,000 bpd and raised supply forecasts by 200,000 bpd last week, projecting 1.8 million bpd in new supply, which may limit long-term bullish sentiment.

Closing statement: Crude oil prices are being propelled higher by severe geopolitical risks, particularly around the Strait of Hormuz. While IEA’s bearish supply-demand revision tempers some optimism, the threat of a full-scale conflict in the Middle East continues to dominate short-term price action. Markets remain on edge as further retaliatory moves unfold.

• DAX Price: The DAX Index surged 1.27% on Friday, June 20, ending a three-day losing streak and closing at 23,351, effectively reversing Thursday’s 1.12% loss. Broad-based buying supported the rally as sentiment improved on macroeconomic developments.
• Producer Prices: Germany’s producer prices fell 1.2% YoY in May, a sharper decline than April’s 0.9% drop. As a leading inflation indicator, this supports the case for further ECB rate cuts, boosting market confidence and equity demand.
• Index Stocks: Risk-on sentiment lifted key sectors: Commerzbank (+2.02%) and Deutsche Bank (+0.82%) led banking, while SAP (+1.37%) and Infineon Technologies (+0.50%) paced tech. Auto stocks like Volkswagen (+0.88%), BMW, Mercedes-Benz, and Porsche posted solid gains, even as the end of Trump’s 90-day tariff pause nears.
• German PMI Data: Next up are Germany’s flash PMIs, with expectations for modest improvement: Services PMI is forecast at 47.7 (May: 47.1), and Manufacturing PMI at 48.7 (May: 48.3). Data will help assess Germany’s economic momentum heading into Q3.
• US Services PMI: Later in the session, US flash PMIs could shape global risk appetite. As services account for ~80% of US GDP, the S&P Global Services PMI (forecast: 52.9 vs. May’s 53.7) could affect Fed rate expectations and spill over into European equity markets.

Closing statement: Friday’s DAX rebound was driven by easing inflation pressures and broad-based sectoral strength. However, tariff uncertainty and incoming PMI data from both Germany and the US will be key in determining whether momentum continues into next week. Investors remain cautious but optimistic.