Daily Analysis 26/06/2025

• GBP/USD Price: The GBP/USD pair extended its winning streak for a fourth straight session, reaching around 1.3700 during European hours on Thursday, supported by continued broad-based US Dollar weakness and improved UK sentiment.
• UK Business Activity: June data showed the S&P Global UK Composite PMI rose to 50.7, up from 50.3 in May and above expectations of 50.5. The expansion above the 50 mark points to modest economic growth, offering underlying support to the Pound Sterling.
• BoE's Bailey: Bank of England Governor Andrew Bailey reiterated earlier this week that the UK labor market is softening, reinforcing expectations for a gradual decline in interest rates. This forward guidance continues to shape market pricing for further cuts in 2024.
• Fed's Powell: Fed Chair Jerome Powell warned that Trump’s tariff policies may result in a temporary spike in inflation, though some effects may become more persistent. These remarks keep the Fed's rate outlook data-dependent, limiting USD support.
• Bailey Speech: Traders are eyeing Governor Bailey’s upcoming speech for additional clues on policy direction. Any dovish tone or downward revision in the economic outlook could lead to GBP softness, particularly after a strong run this week.

Closing statement: GBP/USD remains well-supported by a modest UK growth rebound and broad USD weakness. However, with markets pricing in BoE rate cuts and tariff-related inflation risks in the US, policy commentary from both central banks will remain pivotal to short-term direction.

• XAU/USD Price: Gold prices are finding renewed buying interest near the 50-day Simple Moving Average (SMA) at $3,325, as the ongoing US Dollar selling bias lends support to the yellow metal. Price action suggests consolidation after recent downside moves.
• Trump Hints: President Donald Trump revealed he is considering several candidates to replace Fed Chair Jerome Powell, including Kevin Warsh, Kevin Hassett, Scott Bessent, David Malpass, and Christopher Waller. The uncertainty over future Fed leadership injects policy unpredictability, which typically supports safe-haven demand for gold.
• US-Iran Diplomacy: Trump confirmed a US-Iran meeting next week but questioned its necessity, pointing to the effectiveness of recent US airstrikes. This mixed tone on diplomacy vs. confrontation keeps geopolitical tensions elevated, underpinning gold’s appeal.
• NATO Commentary: While US lawmakers have pushed for new sanctions on Russia, NATO discussions indicate a cooling stance. Secretary of State Marco Rubio’s comments downplaying the likelihood of immediate sanctions reduce broader risk sentiment — neutral to slightly bearish for gold.
• US Data: Market participants await Durable Goods Orders, Jobless Claims, and Pending Home Sales data. Any signs of weakness could further pressure the USD and enhance gold’s attractiveness as a hedge.

Closing statement: Gold remains technically supported around $3,325, with USD softness and geopolitical uncertainty offering upside potential. However, sentiment may shift quickly depending on Fed leadership signals and macro data outcomes, keeping price action data-driven in the short term.

• Crude Oil Price: West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $64.80 during European trading hours on Thursday.
• EIA Report: Crude Oil Inventories fell more than expected last week. The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the US for the week ending June 20 declined by 5.836 million barrels.
• China Signals: China’s Finance Minister Li acknowledged “unprecedented challenges” facing the global economic recovery and pledged strong measures to boost domestic consumption. Hopes of Chinese demand support offer a positive undertone for oil markets.
• Russia Signals: As the July 6 OPEC+ meeting approaches, Russia has expressed openness to an additional output increase if needed. This shows strategic adaptability within the group, which may balance supply with evolving demand conditions — a potentially price-stabilizing factor.
• PCE Inflation: Traders are closely eyeing Friday’s US PCE Price Index, a key Fed inflation gauge. Any downside surprise could bolster expectations of Fed rate cuts, possibly weakening the dollar and supporting commodity prices, including oil.

Closing statement: Crude oil is finding support from tighter inventories and hints of stimulative policy from China, though OPEC+ decisions and macroeconomic data remain key drivers. The market appears poised for range-bound consolidation ahead of next week’s OPEC+ meeting and Friday's inflation data.

• DAX Price: The DAX closed 0.61% lower at 23,498.33 on Wednesday but rebounded on Thursday, supported by improved sentiment after the ceasefire between Israel and Iran. Reduced geopolitical risk boosted investor appetite for equities, particularly in defense and industrial sectors.
• Consumer Sentiment: The GfK consumer sentiment index for July fell slightly to -20.3 vs -19.3 expected, as households plan to increase savings.
• Economic Expectations: Economic expectations jumped to 20.1, their highest level since the start of the Ukraine conflict, on hopes tied to a €500 billion defense and infrastructure stimulus package.
• Income Expectations: Income expectations rose for a fourth consecutive month, reaching 12.8 points, buoyed by solid wage agreements and moderating inflation. This underpins consumer resilience, which could support domestic demand and corporate earnings.
• NATO Spending: NATO, under pressure from President Trump, committed to raising defense spending to 5% of GDP by 2035, up from 2%. This strategic shift boosted German defense stocks, with Rheinmetall, Renk, and Hensoldt gaining between 3.1% and 5.7%, offering support to the DAX.

Closing statement: While consumer sentiment remains cautious, rising economic and income expectations alongside strong sectoral gains in defense are lending momentum to the DAX. The ceasefire in the Middle East and fiscal optimism in Germany are creating a more constructive backdrop for equity markets.