Daily Analysis 26/02/2025

• GBP/USD Price: After erasing early Asian session gains, GBP/USD trades lower around 1.2650 in the early European hours on Wednesday. The pair remains under pressure as market sentiment stays cautious.
• UK Spending: The Confederation of British Industry (CBI) reported that British retailers are planning the most significant investment cuts in over five years due to sluggish consumer demand and high prices, signaling economic strain.
• BoE Rates: A recent Reuters poll of 65 economists suggests the Bank of England (BoE) will maintain interest rates at 4.50% in March, with a potential cut to 4.25% in Q2 as inflation moderates.
• BoE’s Dhingra: BoE Monetary Policy Committee (MPC) external member Swati Dhingra, who advocated for a 50 bps rate cut in February, reiterated that monetary policy remains restrictive, hinting at the need for easing.
• US GDP Data: With a light economic calendar for both the UK and the US on Wednesday, traders are focused on Thursday’s US Gross Domestic Product (GDP) data, which could influence broader market sentiment and GBP/USD movement.

Closing statement: GBP/USD remains pressured below 1.2650, with weak UK retail sentiment and BoE rate cut expectations weighing on the Pound. The pair’s next move will likely hinge on upcoming US economic data.

• XAU/USD Price: After hitting a one-week low in the previous session, gold prices bounce back, supported by lingering concerns over US President Donald Trump's tariff strategies, which fuel demand for safe-haven assets.
• China’s Gold Imports: Gold faced selling pressure after data from the Hong Kong Census and Statistics Department revealed a 44.8% decline in China’s gold imports via Hong Kong in January, marking the lowest level in nearly two years.
• Trump's Plans: On Tuesday, President Trump directed Commerce Secretary Howard Lutnick to initiate a national security investigation under Section 232 of the Trade Expansion Act of 1962, the same law used in his first term to impose 25% tariffs on steel and aluminum.
• Fed's Logan: Dallas Fed President Lorie Logan suggested that, in the medium term, the Federal Reserve should prioritize buying shorter-term securities over longer-term ones to align its portfolio with Treasury issuance trends, potentially impacting interest rate expectations.
• Fed Speeches: With no significant US economic releases scheduled for Wednesday, gold traders will closely watch speeches from Federal Reserve officials for clues on future policy direction, which could influence the non-yielding metal’s price.

Closing statement: Gold remains supported by trade uncertainty and cautious Fed signals, despite weak Chinese import data. Market participants will look to Fed commentary for further direction.

• WTI Oil Price: West Texas Intermediate (WTI) crude oil trades around $69.10 during early European hours on Wednesday, facing renewed selling pressure as prices hit a two-month low.
• Trump’s Tariff Plans: Analysts note that US President Donald Trump’s push for higher tariffs has intensified inflation fears, potentially prompting the Federal Reserve (Fed) to keep interest rates elevated. This could slow economic growth and reduce energy demand.
• US Crude Stockpiles: The American Petroleum Institute (API) reported a decline of 640,000 barrels in US crude oil stockpiles for the week ending February 21, contrasting with the previous week’s increase of 3.34 million barrels. However, this drawdown has failed to lift market sentiment.
• Russia-Ukraine Peace Deal: Reports suggesting potential peace negotiations between Russia and Ukraine have fueled expectations that Western sanctions on Russian oil may be lifted, which could flood the market with additional supply and weigh on prices.
• US Expands Sanctions: On Monday, the US imposed a second wave of sanctions on more than 30 brokers, tanker operators, and shipping firms linked to the sale and transportation of Iranian petroleum, potentially impacting global crude supply chains.

Closing statement: WTI remains under pressure due to demand concerns linked to Fed policy, potential Russian supply increases, and trade uncertainty. Market participants will closely watch geopolitical developments and further economic indicators for direction.

• DAX Price: The DAX declined by 0.07% on Tuesday, partially reversing Monday’s 0.62% gain to close at 22,410. Market sentiment weakened as investors reacted to US President Donald Trump’s national security memorandum targeting China’s AI sector, raising fears of escalating trade tensions.
• German Defense Spending: Friedrich Merz, Germany's chancellor-in-waiting, has initiated talks with the Social Democrats to approve a €200 billion ($210 billion) special defense fund. The move underscores Germany’s push to strengthen its military capabilities amid growing geopolitical uncertainties.
• German GDP: Germany’s GDP shrank by 0.2% in Q4 2024, reversing the 0.1% growth recorded in Q3. Weaker exports, sluggish manufacturing output, and lower investment dragged on the economy, while private consumption remained the only source of resilience.
• Consumer Sentiment: The German Consumer Climate Index for March 2025 dropped by 2.1 points to -24.7, compared to a revised -22.6 in the prior month. The persistent weakness in consumer confidence suggests ongoing economic uncertainty and cautious spending behavior.
• US Housing Data: Investors are looking ahead to US new home sales data, set for release on February 26. Economists expect a 2.6% decline in January, following a 3.6% rise in December. A weaker-than-expected reading could influence risk sentiment and broader equity market trends.

Closing statement: The DAX faces headwinds from geopolitical risks, weak economic data, and declining consumer confidence. Investors will closely monitor fiscal policy developments in Germany and US economic indicators for further direction.