Daily Analysis 09/04/2025

• GBP/USD Price: The GBP/USD pair climbs near 1.2820 during Wednesday’s European session, extending its rebound as broad USD weakness persists amid growing uncertainty over US tariff policies. Sterling finds support from the market’s shifting focus toward alternative trading partners.
• US Tariff Policy: The confirmation that US Customs will impose country-specific tariffs on 86 partners is fueling trade anxieties. However, the UK's relatively mild 10% exposure means it may be less vulnerable than major EU economies, offering some resilience to GBP.
• UK News: UK exporters could gain if US buyers pivot away from higher-cost countries. The UK government estimates the GDP impact will remain minimal, under 0.1%, bolstering confidence in the UK’s economic adaptability amid global disruptions.
• BoE Rate Cut: Markets now fully price in a BoE rate cut in May, up from a 50% probability last week. With three total rate cuts now expected by end-2025, the BoE’s policy path is seen aligning with global central bank dovish trends amid weaker trade prospects.
• US News: Traders are awaiting the FOMC Meeting Minutes and comments from Fed's Thomas Barkin, which could provide fresh cues on the US monetary outlook, especially in light of tariff-driven inflation uncertainty.

Closing statement: Sterling is enjoying relative strength vs. the USD as tariff spillovers remain modest for the UK. However, the next directional catalyst will likely come from Fed guidance and evolving BoE rate cut expectations.

• XAU/USD Price: Gold prices are attempting to end their recent correction, with strong demand emerging near the $2,970/oz level early Wednesday. This rebound suggests continued investor interest in precious metals as a hedge amid rising geopolitical and economic risks.
• US-China Tariff Escalation: The implementation of 104% US tariffs on Chinese goods has shocked markets, escalating trade tensions dramatically. Investors are flocking to gold as a safe-haven asset, concerned about the impact on global growth and financial stability.
• Trump Accusations: Late Tuesday, Trump accused China of manipulating the yuan to absorb the tariff shock, although he left the door open for a future deal. The comment added to volatility but also reinforced gold’s appeal as a buffer against fiat currency uncertainty.
• Fed Stance: Chicago Fed President Austan Goolsbee reiterated that monetary policy remains data-dependent, yet markets interpreted his tone as cautious, especially amid growing recession risks.
• Fed Rate Cut: With tariffs threatening US economic momentum, investors are increasing bets on a Fed rate cut cycle, possibly starting as soon as mid-2025. Lower interest rates would further support non-yielding assets like gold.

Closing statement: XAU/USD is stabilizing after a short-term pullback, bolstered by intensified US-China tensions and rising expectations of Fed easing. The $2,970 level remains a key support, while broader sentiment continues to favor gold as a strategic safe haven.

• Crude Oil Price: West Texas Intermediate (WTI) is trading near $57.90/bbl early Wednesday, remaining under pressure as US-China trade tensions escalate, raising fears of a global economic slowdown that could dent oil demand.
• China Stimulus: Reuters reports that top Chinese officials will meet to discuss potential stimulus measures aimed at offsetting the negative impact of US tariffs. Markets are watching closely for announcements that could stabilize demand in the world’s second-largest oil consumer.
• GS Forecast: Goldman Sachs warned that the tariff escalation presents a downside risk to global economic activity. The bank maintains a 2025 GDP forecast of 4.5%, but sees rising uncertainty weighing on energy consumption forecasts.
• South Korea Reaction: South Korea announced emergency support for its auto sector, after a 25% US tariff on vehicle imports. The move underscores how tariffs are reshaping global trade flows, potentially disrupting supply chains and energy usage patterns.
• API Report: On a supportive note, the American Petroleum Institute (API) reported a 1.057 million barrel draw in US crude inventories last week. This unexpected decline may offer short-term price relief, though demand-side fears still dominate.

Closing statement: WTI prices remain pressured by escalating tariff-related demand concerns, despite a modest decline in US inventories. The market is likely to remain volatile as traders await China’s policy response and monitor developments in global trade dynamics.

• DAX Price: Germany’s DAX index closed at 20,280, rebounding 2.48% on Tuesday after Monday’s sharp sell-off. The rally reflects a relief rebound fueled by signs of political stabilization and hopes for diplomatic solutions to trade tensions.
• Political Stability: Markets welcomed news that Chancellor Merz secured a coalition agreement, calming investor nerves after recent volatility. The deal boosts confidence in Germany's ability to navigate trade tensions and domestic policy hurdles.
• EU Tariff Response: European Commission President Ursula von der Leyen announced measured counter-tariffs, including the exclusion of US bourbon, signaling a more diplomatic tone in the EU's response. This helped improve sentiment in European equities, especially export-heavy sectors.
• US Tariff Rollout: Investors remain cautious ahead of the April 9 implementation of broad US import tariffs, including a 20% levy on EU goods. Asian market declines overnight reflect ongoing fears of a global recession and a flight to safe-haven assets.
• German Corporate News: On Wednesday, attention turns to the Deutsche Telekom Annual General Meeting and Volkswagen's Q1 sales report, which could offer insight into how German corporates are navigating the evolving macroeconomic and trade landscape.

Closing statement: The DAX’s rebound reflects optimism around political clarity and restrained EU trade responses, but US tariff risks and global recession fears continue to loom. Investors will closely monitor upcoming corporate updates and macroeconomic data for direction.