Daily Analysis 20/03/2025

• GBP/USD Price: The GBP/USD pair retreats below 1.3000 in European trading. The RSI on the 4-hour chart is declining toward 50, suggesting a loss of bullish momentum as the pair approaches the midpoint of the ascending regression channel.
• UK Unemployment Rate: Data from the UK Office for National Statistics showed the ILO Unemployment Rate increased to 4.4% in the three months to January, indicating softening in the labor market and potential headwinds for the Pound.
• BoE Rates: The Bank of England (BoE) is expected to maintain its benchmark rate at 4.5% on Thursday amid economic uncertainty. Markets anticipate the next rate cut in May, suggesting a cautious approach.
• Fed Outlook: Fed Chair Jerome Powell stated that the US economy remains resilient, with the Fed expecting at least two rate cuts this year. This optimistic outlook is supporting the US Dollar.
• FOMC GDP Forecast: The Federal Open Market Committee (FOMC) revised its end-2025 GDP forecast down to 1.7% from 2.1%, reflecting increased economic headwinds and slower growth expectations.

Closing statement: GBP/USD may face further downside pressure as soft UK labor market data and BoE policy caution contrast with the Fed's relatively stronger economic outlook and steady rate path.

• XAU/USD Price: Gold (XAU/USD) reached a fresh record high as dovish Fed expectations and geopolitical uncertainty continued to drive demand for the safe-haven asset. A weak US Dollar further supported gold prices.
• Fed Rates: As expected, the Federal Reserve held the federal funds rate steady at 4.25%–4.5% during its March meeting. Fed Chair Jerome Powell acknowledged solid labor market conditions and easing inflation, though it remains slightly above the 2% target.
• Dot Plot: The FOMC’s dot plot showed the median end-2025 interest rate at 3.9%, suggesting little change from the previous projection. The Fed also plans to slow down its balance sheet runoff starting in April.
• Geopolitical Risks: Israel announced renewed ground operations in Gaza and issued a "last warning" for the return of hostages and removal of Hamas from power. This escalation further strengthened safe-haven demand for gold.
• US Data: Traders will watch mid-tier US data on Jobless Claims and Existing Home Sales for signs of underlying economic strength or weakness, which could influence the Fed’s rate path and gold’s direction.

Closing statement: Gold’s rally reflects a mix of geopolitical tensions, Fed policy caution, and a weaker USD. The outlook remains bullish as market uncertainty and dovish rate expectations continue to support demand.

• WTI Oil Price: West Texas Intermediate (WTI), the US crude oil benchmark, trades around $67.10 during early European hours on Thursday, reflecting market caution amid geopolitical uncertainty.
• US-Russia Agreement: On Tuesday, US President Donald Trump and Russian President Vladimir Putin agreed to halt strikes on energy infrastructure linked to the Ukraine conflict. However, Putin rejected a broader ceasefire, maintaining underlying geopolitical risks.
• Russian Oil Supply: Western sanctions have constrained Russian oil output since the conflict began. A limited ceasefire could ease these sanctions, potentially increasing global oil supply and putting downward pressure on prices.
• Red Sea Tensions: Trump warned that the US would hold Iran responsible for any future Houthi-led attacks in the Red Sea, which have already disrupted shipping routes and added to market volatility.
• US Crude Inventories: Data from the EIA showed that US crude oil stockpiles rose by 1.745 million barrels for the week ending March 14, suggesting softer demand and adding to downward pressure on prices.

Closing statement: Crude oil remains under pressure as rising inventories and geopolitical uncertainty weigh on market sentiment. A potential easing of Russian sanctions could further increase supply, limiting upside potential.

• DAX Price: The DAX slipped 0.4% on Wednesday, marking a modest recovery from earlier lows. German defense stocks led the decline, with investors engaging in profit-taking after the approval of the billion-euro financial package.
• Profit-Taking: Market participants took profits following the German government's approval of a billion-euro infrastructure and defense fund, which had previously fueled the DAX's upward momentum.
• Lagarde’s Testimony: ECB President Christine Lagarde is set to appear before the Economic and Monetary Affairs Committee (ECON) in Brussels to discuss the ECB’s monetary policy outlook.
• Defense Sector: Further developments in Ukraine will be discussed at the ongoing EU summit. EU governments are expected to debate financing strategies for increased defense spending, which could drive sector-specific volatility.
• Upcoming Data: Both the Swiss National Bank (SNB) and the Bank of England (BoE) are set to announce policy decisions. While the SNB may surprise with a hold, the BoE is expected to maintain a cautious, wait-and-see stance.

Closing statement: The DAX remains under pressure as profit-taking and geopolitical uncertainty weigh on sentiment. Central bank decisions and defense sector developments could drive short-term volatility.