Daily Analysis 12/02/2025

• GBP/USD Price: GBP/USD clings to recent recovery gains, trading around 1.2460 during Wednesday’s European session. The pair benefits from a slight improvement in market sentiment, though broad US Dollar (USD) strength limits further upside.
• BoE Commentary: The Pound faces pressure after Bank of England (BoE) MPC member Catherine Mann hinted at a dovish stance in an interview with the Financial Times. Mann’s cautious approach to interest rate guidance suggests limited scope for further tightening, weakening support for the GBP.
• Trade Tensions: The lingering threat of a 25% tariff hike announced by US President Donald Trump adds to trade war fears, potentially dampening UK trade prospects and putting additional pressure on GBP/USD.
• Fed Signals: Fed Chair Jerome Powell, in his semi-annual report to Congress, signaled no urgency for rate cuts, citing a strong labor market and solid economic growth. This supports the USD and may limit the GBP/USD’s recovery in the short term.
• US CPI Data: Investors await the US Consumer Price Index (CPI) inflation report scheduled for release on Wednesday. The data could influence Fed rate expectations and drive USD volatility, which will be crucial for the GBP/USD’s near-term direction.

Closing statement: GBP/USD remains vulnerable to US Dollar strength and policy signals from both the BoE and the Fed. Traders should watch for the US CPI data for potential catalysts, which could determine whether the pair sustains its recovery or resumes its downward trend.

• XAU/USD Price: Gold consolidates its recent pullback from record highs of $2,943, trading just under $2,900 early Wednesday. The metal pauses its upward momentum as traders remain cautious ahead of key economic and geopolitical developments.
• Geopolitical Tensions: Israeli Prime Minister Benjamin Netanyahu warned of renewed military action if Hamas does not release hostages by Saturday. US President Donald Trump backed this stance, calling for the ceasefire to end if hostages are not returned, which keeps geopolitical risks elevated and supports gold’s safe-haven appeal.
• Trump’s Tariff Orders: President Trump signed executive orders imposing a 25% tariff on steel and aluminum imports and hinted at broader reciprocal tariffs. This move fuels fears of escalating trade tensions, which could bolster demand for gold as a hedge against economic uncertainty.
• Fed Outlook: Fed Chair Jerome Powell told the Senate Banking Committee that the US economy remains strong, with a resilient labor market and easing inflation. However, inflation still exceeds the 2% target, suggesting the Fed will continue to monitor data closely before adjusting policy.
• US CPI Data: Investors now turn their attention to the US Consumer Price Index (CPI) release later in the day. The data could offer fresh clues on the Fed’s next move and set the tone for gold’s direction in the near term.

Closing statement: Gold prices remain sensitive to both geopolitical tensions and economic data. Any surprises in the US CPI could trigger significant volatility, making it a key event for traders to watch.

• WTI Oil Price: West Texas Intermediate (WTI) trades near $72.75 during the early European session on Wednesday, marking a two-week high. Positive momentum continues amid renewed concerns about supply constraints and geopolitical risks.
• US Sanctions: The latest US sanctions on Russia’s oil industry imposed in January have raised concerns over potential disruptions in Russian and Iranian oil supplies. This uncertainty supports the upward trend in crude oil prices.
• Geopolitical Tensions: Rising risks in the Middle East contribute to the WTI’s upside. Israeli Prime Minister Benjamin Netanyahu warned that the ceasefire in Gaza would end if Hamas does not release hostages by Saturday, increasing market anxiety about regional stability.
• US Crude Inventory: Gains in WTI might be limited by the latest inventory data. The American Petroleum Institute (API) reported that US crude oil stockpiles rose by 9.043 million barrels for the week ending February 7, signaling weaker demand.
• Trump’s Tariff Hike: On Monday, President Trump raised tariffs on steel and aluminum imports to 25%, which analysts believe could increase inflationary pressures. This may push the Federal Reserve to maintain elevated interest rates, potentially influencing future oil demand.

Closing statement: WTI’s short-term outlook remains supported by geopolitical risks and supply concerns. However, rising US inventories and inflation risks could keep gains in check. Eyes now turn to US economic data for further market cues.

• DAX New ATH: On Tuesday, the DAX advanced by 0.58%, building on Monday’s 0.57% gain and closing at 22,038. The index broke above the 22,000 mark for the first time, reaching a record high of 22,046 before retracing slightly.
• Tarrifs: Investor sentiment improved as speculation grew that US President Donald Trump’s tariff maneuvers were strategic rather than an escalation of trade tensions. However, the 25% tariffs on aluminum and steel imports may still pose challenges for European metal producers.
• Automakers: Tariff-related concerns weighed heavily on the auto sector. Porsche fell 1.63%, while BMW and Volkswagen dropped 1.06% and 1.04%, respectively. Mercedes-Benz Group also closed lower. Potential tariffs targeting automakers could hurt price competitiveness and dampen demand for German cars.
• Powell’s Testimony: Federal Reserve Chair Jerome Powell testified before Congress, reiterating the Fed’s patient stance on monetary policy. He cited a strong labor market and persistently high inflation as key factors behind the cautious approach.
• US CPI Data: All eyes are now on Wednesday’s US Consumer Price Index (CPI) report, which could influence market sentiment and the Fed’s rate outlook. Economists forecast the core inflation rate to ease from 3.2% in December to 3.1% in January, potentially impacting global markets.

Closing statement: The DAX’s ability to maintain gains above 22,000 depends on easing trade tensions and US economic data. A softer US CPI could support the rally, while heightened tariff risks may cap further upside.