Daily Analysis 07/01/2025

• GBP/USD Price: GBP/USD trades near 1.2560 in Tuesday’s European morning session, benefiting from a weaker US Dollar. The pair has held its bid tone amid subdued USD performance, signaling resilient demand for the Pound Sterling (GBP).
• UK Retail Sales: The British Retail Consortium (BRC) reported a 3.1% increase in Like-For-Like Retail Sales for December 2024.
• BRC Chief's Statement: The positive figure of Retail Sales was overshadowed by remarks from BRC Chief Executive Helen Dickinson, who noted that the "golden quarter" underperformed expectations, reflecting weak consumer confidence.
• Services Sector: December’s S&P Global Services PMI for the UK fell to 51.1, down from 51.4, highlighting a loss of momentum in the services sector. This dip in activity has raised concerns about broader economic growth heading into 2025.
• UK Business Confidence: According to the British Chambers of Commerce, business confidence has hit its lowest level since the turbulent period following former PM Liz Truss’s “mini budget” in 2022. Persistent economic challenges and uncertainty continue to weigh on sentiment.

Closing statement: GBP/USD’s strength hinges on Dollar weakness rather than robust domestic performance. While upbeat retail sales data offer some support, weak business sentiment and a slowing services sector may cap gains. External factors, particularly US market developments, will likely dictate the pair’s near-term trajectory.

• Gold Trading: Gold prices remain range-bound following Monday’s mixed price action as traders assess reports regarding incoming US President Donald Trump’s tariff plans. The lack of a decisive direction reflects market caution in the face of potential policy shifts.
• Demand from India: Rising domestic gold prices in India, driven by a record low Indian Rupee (INR), have significantly dampened physical gold demand. As the world’s second-largest gold consumer, India’s reduced purchasing activity exerts downward pressure on gold prices.
• GS Forecast: Goldman Sachs delayed its forecast for gold reaching $3,000 per ounce, now projecting this milestone beyond 2025. This revision has contributed to bearish sentiment in the market, tempering expectations of significant upside.
• Richmond Fed President’s Speech: Richmond Federal Reserve President Thomas Barkin’s speech on the economic outlook is highly anticipated, as it could provide critical insights into the Fed’s next policy steps. Any dovish signals could offer near-term support for gold prices.
• US Data: Later Tuesday, speculation around Trump’s tariff plans, upcoming US jobs data, and broader market sentiment will be key drivers of gold price action. Traders will closely monitor these developments for signs of volatility.

Closing statement: Gold remains under pressure due to weak demand from India and revised price forecasts, with traders awaiting clarity on Trump’s tariff policies and Fed signals. While external factors may provide short-term support, downside risks persist in the near term.

• WTI Price: West Texas Intermediate (WTI) crude oil prices continued their downward trend, trading around $73.20 per barrel during Tuesday’s European session. This marks the second consecutive session of losses, as traders assess global market dynamics.
• OPEC Supply Cuts: Crude oil prices may find support following reports of a decline in OPEC production in December. The reduction, driven largely by the UAE’s commitment to supply cuts, reflects ongoing efforts to stabilize global oil markets amid demand uncertainties.
• US Offshore Oil Development: President Joe Biden’s decision to ban new offshore oil and gas projects along most US coastlines could limit domestic production in the short term. However, this policy may face challenges under the incoming Trump administration, which has pledged to boost US energy output.
• Sanctions on Russia: The Biden administration plans additional sanctions aimed at curbing Russia’s oil revenues, including measures against tankers transporting Russian crude. These sanctions could further tighten global oil supply, influencing market sentiment.
• China’s Fiscal Stimulus: China’s fiscal stimulus efforts, including significant funding through ultra-long-dated treasury bonds, aim to stimulate business investment and consumer spending. As the world’s largest crude importer, China’s economic recovery could provide a tailwind for oil demand.

Closing statement: WTI crude faces near-term headwinds due to geopolitical factors and regulatory developments, but OPEC supply cuts and China’s stimulus initiatives may support prices. Traders will watch for policy changes and demand signals for further direction.

• DAX Technicals: After retreating from its record high of 20,500, the DAX continues to hold strong at the 19,600–19,750 support zone. The index has since rebounded from this level, making a renewed attempt to rise above the psychologically important 20,000 mark.
• German PMI Data: German services and composite PMIs exceeded expectations in December. The services PMI edged up to 51.2 from 51, indicating marginal growth, while the composite PMI rose to 48 from 47.8, signaling slower contraction in business activity. These figures highlight a slightly improved but still fragile economic environment.
• Dovish ECB: The fragile economic outlook bolsters expectations of continued rate cuts by the European Central Bank (ECB). While this dovish stance provides support for the DAX, growing uncertainties surrounding global trade policies and inflation remain challenges.
• Trump’s Tariff Agenda: Despite President-elect Donald Trump refuting claims he will soften his tariff policies, market sentiment remains cautiously optimistic. Investors seem to believe the administration’s trade measures may not be as aggressive as previously feared.
• Upcoming Data: Eurozone inflation data, expected to show a rise to 2.4% in December from 2.2% in November, could further shape ECB policy expectations. Meanwhile, the economic calendar builds toward Friday’s US nonfarm payrolls report, which will likely influence global markets, including the DAX.

Closing statement: The DAX remains supported by a dovish ECB and improving PMI data, but headwinds from trade uncertainties and inflation could weigh on sentiment. Market participants will closely monitor inflation trends and upcoming US economic data for further direction.