Daily Analysis 24/02/2025

• GBP/USD Price: GBP/USD opens the week with modest gains but remains below the key 1.2650 level in early European trading on Monday. The pair struggles to gain strong momentum amid mixed economic signals.
• UK Retail Sales: The Pound continues to find support from Friday’s strong UK Retail Sales data, which showed a 1.7% MoM increase in January. The rebound highlights resilience in consumer spending, despite broader economic concerns.
• BoE's Outlook: Despite the Bank of England’s (BoE) cautious stance, GBP/USD remains primarily driven by broader market sentiment and USD price movements.
• BoE Governor: Bank of England's Governor Andrew Bailey reiterated last week that UK economic growth is expected to stay sluggish, with annual GDP forecasts for 2024 slashed to 0.75%.
• PMI Data: The February Flash S&P Global/CIPS Composite PMI came in at 50.5, slightly lower than January’s 50.6 but still in expansion territory. The data suggests a tepid but stable economic environment, limiting any major downside for GBP.

Closing statement: GBP/USD maintains a cautious upward bias, supported by resilient UK data but weighed down by BoE’s downbeat economic outlook. The pair’s near-term direction hinges on upcoming US economic releases and broader risk sentiment.

• XAU/USD Price: Gold remains well-supported as worries over Trump’s potential tariff policies continue to drive safe-haven demand. Fresh USD selling and persistent inflation concerns also contribute to XAU/USD’s strength.
• Geopolitical Developments: Russian Deputy Foreign Minister Sergei Ryabkov confirmed that upcoming peace talks will be held at the department head level, rather than with deputy foreign ministers. This signals a slower path toward resolution, keeping geopolitical risks elevated and boosting gold’s appeal.
• China’s Rural Revitalization: China introduced new policies aimed at strengthening rural development as part of its “No.1 document” for 2025. This move supports overall market sentiment and could indirectly benefit gold by reinforcing demand for commodities.
• Fed Rate Cut: Market expectations for two Fed rate cuts this year remain intact, reinforced by the US Composite Flash PMI Output Index dropping from 52.7 in January to 50.4—a 17-month low. A more dovish Fed outlook typically supports gold by weakening the USD.
• US Consumer Sentiment: The University of Michigan’s US Consumer Sentiment Index plunged to a 15-month low of 64.7 in February, down sharply from 71.7 in January. This deterioration increases the likelihood of Fed easing, further underpinning XAU/USD.

Closing statement: Gold remains well-positioned for further gains amid geopolitical uncertainty, Fed rate cut expectations, and deteriorating US economic data. The upcoming US GDP and PCE inflation reports will be crucial in determining the next move for XAU/USD.

• WTI Oil Price: West Texas Intermediate (WTI) crude oil prices edge lower to around $70.00 per barrel during European trading hours on Monday, as market sentiment remains cautious amid global supply developments.
• Iraq plans: Iraq's Oil Ministry confirmed plans to export 185,000 barrels per day (bpd) from Kurdistan’s oilfields through the Iraq-Turkey pipeline. This move could add supply to the market, putting downward pressure on oil prices.
• Russia-Ukraine Conflict: As the Russia-Ukraine war enters its fourth year, European Union leaders will hold an extraordinary summit on March 6 to discuss further support for Ukraine and broader European security measures. Market participants remain watchful of any geopolitical developments that could impact energy markets.
• US-Russia meeting: A senior Russian diplomat stated that Russian and US officials are set to meet this week to explore ways to improve bilateral relations. The talks follow President Trump’s recent outreach to Moscow, which could have implications for global energy markets and potential shifts in oil supply dynamics.
• US Foreign Investments: On Friday, President Trump signed a memorandum instructing the Committee on Foreign Investment in the United States (CFIUS) to impose new restrictions on Chinese investments in strategic sectors. Any escalation in US-China trade tensions could influence global oil demand expectations.

Closing statement: WTI crude remains under pressure as geopolitical developments, potential supply increases from Iraq, and US-China trade policies weigh on sentiment. Investors will closely monitor upcoming EU discussions and US-Russia talks for further cues on oil price direction.

• DAX Price: The DAX declined by 0.12% on Friday, extending Thursday’s 0.53% loss, closing at 22,288. While auto and banking stocks helped limit losses, the index struggled amid earnings concerns. Volkswagen gained 1.62%, and Porsche rose 0.98%, but Mercedes-Benz Group fell 1.39% following disappointing earnings and a dividend cut.
• German Elections: Preliminary election results indicate a victory for the Christian Democratic Union (CDU) and its ally, the Christian Social Union (CSU), led by Friedrich Merz. The far-right Alternative for Germany (AfD) secured second place with approximately 19–20% of the vote. Market focus now shifts to coalition negotiations and potential economic reforms to address Germany’s sluggish growth.
• Germany’s PMI Data: The latest private sector PMI data for February signaled a modest recovery, with the Composite PMI rising to 51.0 from 50.8 in January. A slower contraction in manufacturing activity contributed to the uptick, suggesting tentative stabilization in business conditions.
• Ifo Business Climate: On Monday, February 24, Germany’s Ifo Business Climate Index is expected to rise from 85.1 in January to 85.8 in February. A stronger-than-expected reading could boost investor confidence, while a disappointment may reinforce concerns over prolonged economic stagnation.
• US Economic Data: Market participants will also watch the Chicago Fed National Activity Index and Dallas Fed Manufacturing Index on February 24. Stronger-than-expected US data could ease fears of an economic slowdown and lift global risk sentiment, while weaker figures may weigh on equities, including the DAX.

Closing statement: The DAX remains under pressure amid political and economic uncertainty in Germany. Investors will closely monitor coalition talks, the Ifo Business Climate report, and US economic indicators for further market direction.