Daily Analysis 08/04/2025

• GBP/USD Price: The British Pound is consolidating its rebound just below the 1.2800 mark in early European trading Tuesday, benefiting from a weaker US Dollar as tariff-driven uncertainty clouds the Fed’s outlook.
• UK's Starmer: Markets are keeping an eye on Prime Minister Keir Starmer, who will chair a Cabinet meeting and appear before the Liaison Committee just before Parliament breaks for the Easter recess. While not market-moving on its own, political stability supports GBP sentiment.
• Tariff Fatigue: Despite general expectations for a stronger dollar, the "tariff fatigue" narrative has taken hold. This view suggests the USD rally may be more limited, as global trade disruptions begin to offset haven flows.
• Fed Cuts: Investors continue to price in nearly 200 basis points of Fed rate cuts through the rest of 2025, even as the Fed maintains a cautious tone, pointing to trade uncertainty as a barrier to immediate policy easing.
• BoA Warning: Bank of America has issued a stark warning, highlighting that intensifying U.S.-China trade tensions could significantly dent corporate earnings in 2025, adding to global risk aversion and potentially reinforcing dovish central bank bias.

Closing statement: GBP/USD remains supported near 1.2800 as USD softness, political calm in the UK, and global trade risks continue to favor Sterling. However, the pair’s upside will be tested as markets await key US inflation data and Fed signals later this week.

• XAU/USD Price: Gold (XAU/USD) attracts renewed buying interest, rebounding from recent lows as investors seek shelter amid intensifying US-China trade tensions. The yellow metal holds steady above key levels as safe-haven flows gain traction.
• China Retaliation: The Chinese Commerce Ministry warned Tuesday it will “firmly oppose and take countermeasures” if the US proceeds with additional 50% tariffs, heightening global uncertainty and reinforcing demand for gold.
• BoA Prediction: Bank of America revised its S&P 500 earnings forecast down by 10% for 2025, citing the potential impact of Trump’s tariff package. The economic fallout has increased gold's appeal as a hedge against equity market volatility.
• Fed’s Kugler: Fed Governor Adriana Kugler stated that while short-term inflation expectations have risen, they remain well-anchored longer term, suggesting the Fed remains cautious on rate cuts—a dynamic that could cap gold’s near-term upside.
• EU Tariff Response: The EU is now preparing retaliatory tariffs on US goods, shifting from a negotiation-first stance. This shift further complicates the global trade landscape, likely keeping gold well-bid as geopolitical tensions simmer.

Closing statement: Gold prices remain underpinned by safe-haven flows as trade tensions escalate globally. While Fed caution on inflation could limit aggressive gains, geopolitical risk and equity market concerns continue to support bullish positioning in XAU/USD.

• Crude Oil Price: WTI crude prices found modest buying interest on Tuesday, recovering from sharp swings driven by US tariff announcements, and are now hovering below the $61.50 level. Market participants are reassessing near-term demand outlooks amid trade uncertainty.
• US Energy Diplomacy: Energy Secretary Chris Wright is set to tour the UAE, Saudi Arabia, and Qatar, aiming to enhance global energy cooperation, promote U.S. investment, and discuss production cost efficiencies—a signal of Washington's attempt to counterbalance tariff tensions with supply-side assurances.
• Moody’s Sentiment: According to Moody’s, the global tariff shock has driven business sentiment into “crisis territory”. If confidence doesn’t recover quickly, recession risks could materialize, further clouding oil demand forecasts.
• Tariff Chaos: Top bank executives from BofA, Barclays, and Citi reportedly convened over the weekend to discuss the escalating fallout from Trump’s tariff actions, highlighting the deepening concern across financial markets—including energy traders.
• Fed Minutes: Oil traders are eyeing the Fed meeting minutes due Wednesday, which may reveal how policymakers are interpreting trade-linked inflation and growth risks, offering clues on potential monetary easing that could indirectly support oil.

Closing statement: Crude oil prices are attempting to stabilize, but sentiment remains fragile amid mounting recession fears and financial market anxiety triggered by the tariff storm. Upcoming Fed commentary and global diplomacy efforts will be key to near-term direction.

• DAX Price: After plunging on Monday morning amid escalating US-China tariff tensions, the DAX index has staged a partial rebound. The market was in free fall just 24 hours prior, but bargain-hunting and speculative recovery trades are now offering modest support.
• Trump's Escalation: On April 7, President Trump threatened a 50% tariff hike on Chinese goods if Beijing does not withdraw its planned 34% retaliatory tariffs by April 8. The looming April 9 deadline adds significant uncertainty to the near-term global trade outlook.
• Secretary Bessent: US Treasury Secretary Bessent confirmed that no trade deals are expected before April 9, reinforcing expectations that the next round of tariffs will be implemented, with likely spillover effects on European export-heavy sectors.
• EU's von der Leyen: In a bid to defuse tensions, the European Union has offered a deal to the US involving the reciprocal elimination of tariffs on industrial goods. EU Commission President Ursula von der Leyen emphasized Brussels' willingness to negotiate, signaling a potential diplomatic path forward.
• Monetary Policy: Investors are also watching central bank rhetoric closely, as the Fed may revise its policy stance in response to the economic risks posed by tariff escalations, which could indirectly affect equity valuations and sentiment in Europe.

Closing statement: While the DAX is rebounding, the underlying risk environment remains volatile. The outcome of US-China tariff talks and central bank responses will likely determine whether the current bounce becomes a sustained recovery—or another dead cat bounce.