Daily Analysis 10/04/2025

• GBP/USD Price: The GBP/USD pair recovers intraday losses, rising for the third consecutive session and hovering around 1.2850 during Thursday's European trading hours. The move is driven by renewed US Dollar weakness and resilient bullish momentum in the pair.
• UK Housing Data: The British Pound faced brief pressure after the RICS Housing Price Balance for March came in at just 2%, missing expectations. The soft data reflects lingering weakness in the UK housing sector, although its impact on the GBP was short-lived.
• BoE Rate Cut: Deutsche Bank analysts now expect the Bank of England could deliver a 50 bps rate cut in May, citing increasing economic vulnerability. Such an aggressive move would diverge from previous expectations and adds uncertainty to the GBP outlook.
• BoE’s Breeden: Market participants are watching closely for commentary from BoE Deputy Governor Sarah Breeden, who is scheduled to speak on UK economic and financial stability prospects. Her remarks may offer insights into BoE’s evolving policy stance.
• Fed Minutes: The FOMC minutes showed broad consensus among US policymakers regarding the risk of sticky inflation coupled with slowing growth. This nuanced view kept the US Dollar somewhat pressured, supporting GBP/USD’s upside.

Closing statement: GBP/USD remains supported by USD softness and short-term technical strength, though rising rate cut expectations from the BoE and weak UK data may limit upside momentum. Attention turns to BoE commentary and upcoming US inflation data for further cues.

• XAU/USD Price: Gold prices continue their upward trajectory, breaking above the $3,100 level, driven by intensifying US-China trade tensions. Investors are increasingly turning to gold as a hedge against geopolitical and economic uncertainty.
• Fed's Kashkari: Minneapolis Fed President Neel Kashkari emphasized that tariffs could stoke inflation, making rate cuts less likely in the near term. His hawkish tone added to doubts over imminent Fed policy easing.
• Fed Expectations: Following the March FOMC minutes, which revealed unanimous concern about rising inflation, markets have dialed back bets on steep rate cuts. This shift in expectations could temper gold’s rally if yields start to rebound.
• Fed’s Hammack: Beth Hammack from the Cleveland Fed maintained a cautious stance, noting that current policy is “modestly restrictive” and that it’s better to wait than to risk missteps in rate direction. This underlines a broader wait-and-see approach from the Fed.
• US CPI Inflation: Markets are eyeing today’s US CPI data for March, expected to show headline inflation at 2.6% YoY and core inflation at 3.0%. Any surprise here could significantly sway Fed expectations and influence gold’s short-term direction.

Closing statement: Gold continues to benefit from risk-off flows and moderating Fed rate cut hopes, with the $3,100 level now acting as near-term support. The US CPI release could prove pivotal in determining the sustainability of gold's rally.

• Crude Oil Price: West Texas Intermediate (WTI) crude oil trades around $62.00 in early European hours Thursday, recovering slightly as the market balances demand risks from China with supply-side developments like the Keystone pipeline shutdown.
• GS Forecast: Goldman Sachs revised its China GDP growth outlook downward, now expecting 4.0% in 2025 (from 4.5%) and 3.5% in 2026 (from 4%). The downgrade reflects concerns over prolonged trade tensions, which could weaken global oil demand.
• Chinese Oil Demand: Rystad Energy’s Ye Lin warns that 50,000 to 100,000 bpd of Chinese oil demand growth is at risk if the trade war continues. However, he notes a strong domestic stimulus might mitigate some of the demand loss, offering a possible upside scenario.
• EIA Report: The latest EIA data showed US crude inventories rose by 2.553 million barrels, down from the previous week's 6.165 million jump, yet still contributing to a bearish tone as demand concerns linger.
• Keystone Pipeline: The Keystone pipeline remains offline following an oil spill in North Dakota. With plans to restart under review, this disruption could offer temporary support to oil prices if extended, given its importance in transporting Canadian crude to the US.

Closing statement: Oil prices remain range-bound, caught between downside demand risks from a slowing Chinese economy and supportive supply shocks like the Keystone outage. The market will stay sensitive to stimulus announcements and geopolitical developments in the coming days.

• DAX Price: The DAX experienced a recovery rally following Trump’s suspension of additional tariffs, offering relief to equity markets after recent turmoil. However, volatility remains elevated, reflecting ongoing investor anxiety over policy uncertainty and geopolitical tensions.
• Global Trade Tensions: US Treasury Secretary Scott Bessent revealed that nearly 70 countries have reached out to the US regarding the evolving tariff measures, underlining the global scale and concern over the intensifying trade conflict.
• China’s Inflation: China’s March CPI came in at -0.1% y/y, missing expectations and reinforcing deflationary concerns in the world’s second-largest economy. Simultaneously, the onshore yuan (CNY) weakened to 7.3518, its lowest level since 2007, signaling broader economic stress.
• Fed's Barkin: Richmond Fed’s Tom Barkin cautioned that tariff-induced price hikes could begin by June.
• Fed's Musalem: St. Louis Fed’s Alberto Musalem emphasized the risk of persistent inflationary effects, signaling that the Fed may hesitate on rate cuts despite growth concerns.

Closing statement: Although the DAX is benefiting from temporary optimism on tariff relief, the fundamental backdrop remains fragile. Traders should watch for upcoming Fed comments, EU policy responses, and further Chinese economic signals as key catalysts for the index’s direction.