Daily Analysis 28/02/2025

• GBP/USD Price: The GBP/USD pair continues its downward movement, trading near 1.2580 during early Friday’s European session. The British Pound remains under pressure amid trade concerns and shifting monetary policy expectations.
• UK Tariffs: US President Donald Trump met with UK Prime Minister Keir Starmer on Thursday, warning that trade tariffs on the UK could be imposed unless certain terms of a trade deal are agreed upon. The uncertainty surrounding UK-US trade relations adds downside risk to the Pound.
• UK Chancellor: UK Chancellor Rachel Reeves expressed confidence on Wednesday that trade and investment between the US and UK would remain stable despite the new US administration's policy stance. However, markets remain cautious about potential trade disruptions.
• BoE’s Dhingra: The British Pound faced additional selling pressure after BoE Monetary Policy Committee (MPC) Member Swati Dhingra signaled support for four rate cuts, advocating for a more aggressive monetary easing stance. This contrasts with other policymakers taking a more measured approach.
• Fed’s Bostic: Atlanta Fed President Raphael Bostic reiterated on Wednesday that the Federal Reserve should maintain current interest rates to ensure continued downward pressure on inflation. This supports the US Dollar and adds further weight on GBP/USD.

Closing statement: GBP/USD remains under pressure due to UK-US trade uncertainty and expectations of BoE rate cuts. The Fed’s cautious stance and potential UK tariffs may keep the pair bearish in the near term.

• XAU/USD Price: Gold (XAU/USD) is struggling to recover losses as the US Dollar remains strong amid risk-off sentiment extending into the European session on Friday. Investors continue to favor the safe-haven appeal of the USD over gold.
• Market Reaction: Traders are weighing US President Donald Trump's latest tariff threats, which have contributed to market volatility. Additionally, a sharp decline in Nvidia's share price has fueled concerns about the broader equity market, keeping investors cautious.
• US Jobless Claims: The number of Americans filing for unemployment benefits rose by 22,000 to 242,000 for the week ending February 22, marking the highest level in three months. This data signals potential softness in the labor market, which could influence Federal Reserve policy.
• Kansas City Fed: Kansas City Fed President Jeff Schmid stated on Thursday that recent surveys indicate rising consumer inflation expectations. He emphasized that the central bank must remain focused on containing price pressures, reducing expectations of an imminent rate cut.
• PCE Inflation: Investors now await the release of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index. The annual core PCE is expected to rise 2.6% in January, down from 2.8% in December. This data will likely set the next directional move for gold.

Closing statement: Gold remains under pressure due to a strong US Dollar, inflation concerns, and uncertainty surrounding Fed policy. The upcoming PCE inflation report will be key in determining whether gold can stage a recovery or extend losses.

• WTI Oil Price: West Texas Intermediate (WTI) crude oil prices are trading around $69.70 per barrel on Friday during European hours, giving up some gains from the previous session. Market sentiment remains cautious as traders assess geopolitical risks and supply concerns.
• Trump's Tarrifs: US President Donald Trump confirmed that a 25% tariff on Mexican and Canadian goods, including a 10% duty on Canadian energy imports, will take effect on March 4. An additional 10% levy on Chinese imports is also planned, raising concerns over potential economic slowdowns affecting oil demand.
• Chevron’s License: Oil prices surged over 2% on Thursday after Trump revoked US oil giant Chevron’s license to operate in Venezuela. Chevron currently exports approximately 240,000 barrels per day from the country, and the suspension could disrupt more than a quarter of Venezuela’s oil production, tightening supply.
• OPEC+ Output Plans: OPEC+ is weighing whether to proceed with its planned oil production increase in April or maintain current levels. The group faces heightened uncertainty following new US sanctions on Venezuela, Iran, and Russia, which could impact global supply and production decisions.
• Russia-Ukraine Peace: Oil prices are also under pressure from expectations of increased global supply. Optimism around a potential Russia-Ukraine peace deal has raised speculation about the easing of Russian sanctions, which could lead to higher Russian oil exports and weigh on crude prices.

Closing statement: Crude oil prices remain under pressure as markets weigh geopolitical developments, potential supply disruptions, and shifting demand outlooks. While sanctions and production cuts may offer support, trade tensions and a potential increase in global supply could limit price gains.

• DAX Price: The DAX fell by 1.07% on Thursday, February 27, partially reversing Wednesday’s 1.71% rally, closing at 22,551. Market sentiment turned negative after US President Donald Trump renewed tariff threats, leading to a shift toward safe-haven assets.
• ECB Meeting Minutes: The European Central Bank (ECB) Monetary Policy Meeting Minutes raised expectations for multiple rate cuts, briefly supporting the market. Policymakers acknowledged the need for caution but highlighted that disinflation remains on track, with ECB staff projecting headline inflation of 2.1% in 2025 and 1.9% in 2026.
• German Retail Sales: Official data from Destatis showed that Germany’s Retail Sales rebounded by 0.2% month-on-month (MoM) in January, following a sharp 1.6% decline in December. The improvement suggests a slight recovery in consumer spending, though underlying demand remains fragile.
• German Import Prices: German import prices rose 3.1% year-on-year in January 2025, marking the largest increase since February 2023. Rising import costs could put further pressure on inflation and impact the ECB’s monetary policy outlook.
• German Inflation Data: Investors are closely watching Germany’s inflation data, set for release today. Economists expect the annual inflation rate to remain steady at 2.3% in February, a key figure that could influence ECB rate decisions moving forward.

Closing statement: The DAX remains under pressure amid trade tensions and monetary policy uncertainty. While expectations for ECB rate cuts offer some support, fears of renewed tariffs and inflationary pressures continue to weigh on investor sentiment.