Daily Analysis 06/01/2025

• GBP/USD Price: GBP/USD approaches 1.2450 during Monday’s European session, supported by the US Dollar's subdued performance despite cautious risk sentiment. Market attention is shifting to key US economic data and central bank commentary later this week.
• Weak Sentiment: The British Pound remains under pressure due to recent weak economic data and concerns over the Labour government’s fiscal strategy. The lack of a clear economic recovery plan continues to erode confidence in the Pound's medium-term prospects.
• BoE’s Dovish Stance: The Bank of England's decision to leave rates unchanged in December, coupled with a split vote and dovish commentary, suggests limited policy support for the GBP. This reinforces the bearish outlook for the currency in the face of broader economic headwinds.
• Fed's Cautious Stance: Over the weekend, Federal Reserve officials emphasized their cautious approach to rate cuts while reiterating the importance of controlling inflation and safeguarding job market stability. This stance may limit the extent of the Dollar's weakness, indirectly capping GBP/USD gains.
• Upcoming US Data: Investors are awaiting Fed Governor Lisa Cook's speech and key US macroeconomic releases, including final Services PMI and Factory Orders, for insights into the US interest rate trajectory. These factors could drive short-term volatility in GBP/USD.

Closing statement: While GBP/USD is benefiting from temporary Dollar weakness, the pair's upside remains limited by weak UK fundamentals and the BoE’s dovish stance. Near-term movements will likely depend on US data and Fed commentary, with risks tilted toward further downside for the GBP.

• Gold Price: Gold prices begin the week under selling pressure, retreating from Friday’s nearly three-week high of $2,665. The current correction reflects profit-taking and cautious sentiment amid mixed economic signals.
• China’s Stimulus: Renewed optimism around China’s economic stimulus boosts the outlook for gold. Over the weekend, the People’s Bank of China (PBOC) pledged increased financial support for technological innovation and consumption to bolster growth.
• Chinese PMI: Gold buyers applaude the strong Chinese Caixin Services PMI, which shot to a seven-month high of 52.2 in December versus 51.7 expected.
• US Dollar Weakness: Gold's rebound is partially attributed to the US Dollar reversing gains from strong ISM Manufacturing PMI data. A weaker Dollar provides relief to gold prices, as the precious metal becomes more affordable for holders of other currencies.
• US Economic Data and Fed: The sustainability of the Dollar’s pullback remains uncertain ahead of mid-tier US data, including final PMI and Factory Orders. Additionally, upcoming speeches by Fed policymakers will be pivotal in shaping expectations for monetary policy, influencing gold’s near-term trajectory.

Closing statement: Gold's recent gains are under pressure from mixed fundamentals, with its short-term trajectory likely tied to the interplay of US Dollar movements and central bank commentary. Any sustained optimism around Chinese stimulus and softer US economic data could provide further upside momentum.

• WTI Price: West Texas Intermediate (WTI) crude oil is trading near $73.80 per barrel, marking its highest level since October 2024. This price action reflects robust demand expectations amid colder weather forecasts and optimism surrounding global economic recovery.
• Heating Oil Demand: With colder temperatures predicted in the US and Europe, heating oil consumption is expected to climb, bolstering crude oil prices. This seasonal demand surge aligns with broader energy market trends supporting price stability.
• China’s Stimulus: Beijing's ongoing fiscal and monetary stimulus efforts continue to bolster crude oil demand. The announcement of increased funding via ultra-long-dated treasury bonds in 2025 has further reassured markets about China's ability to sustain energy consumption growth.
• Iranian Output: Goldman Sachs projects a decline in Iran's oil production and exports by Q2 2025 due to anticipated stricter sanctions under incoming US President Donald Trump. This potential supply disruption adds an element of bullish sentiment to the market.
• Monetary Policies: Reports that the People’s Bank of China (PBoC) may cut interest rates later this year have added a layer of support to crude prices. China's economic trajectory is a key determinant of global crude demand, given its status as the world’s largest importer.

Closing statement: WTI crude oil prices remain well-supported by seasonal demand, China’s stimulus measures, and supply concerns related to Iran. However, market dynamics will hinge on the pace of global economic recovery and the geopolitical landscape, with colder weather and monetary policy adjustments likely to shape short-term price movements.

• DAX Price: The DAX remains under pressure, with auto and tech stocks driving a market-wide decline. Persistent fears over US tariff threats on European goods and a softening Euro area labor market are dampening investor sentiment.
• German Labor Market: Germany’s unemployment rose by 10,000 in December, following a 7,000 increase in November, leaving the unemployment rate steady at 6.1%. The stagnant labor market could weigh on domestic consumption and broader economic recovery efforts.
• Germany’s Services PMI: On Monday, Germany’s HCOB Services PMI requires consideration. According to the preliminary survey, the Services PMI increased from 49.3 in November to 51.0 in December.
• US Manufacturing Data: The US ISM Manufacturing PMI climbed to 49.3 in December from 48.4 in November. New orders rose for a second consecutive month, while price increases and reduced headcounts indicated shifting manufacturing dynamics, potentially impacting global trade flows.
• US Services PMI: Later in the US session, the S&P Global Services PMI will provide further clues about the US economy. The preliminary December reading increased to 58.5, up from 56.1 in November, suggesting robust services sector activity that could influence risk sentiment and demand for DAX-listed stocks.

Closing statement: The DAX faces headwinds from rising unemployment and trade uncertainty, while improvements in Germany’s services sector and US manufacturing data offer glimmers of optimism. Investors will closely monitor upcoming US services PMI data for further insights into global economic trends and their implications for the German equity market.