Daily Analysis 27/01/2025

• GBP/USD Price: GBP/USD remains under selling pressure near 1.2450 during Monday's early European session as the US Dollar Index (DXY) rebounds from a one-month low.
• Dollar Movements: The Greenback finds support from a flight to safety following US President Donald Trump's decision to impose import duties on Colombia.
• Fed Rate Cut: Despite the USD's rebound, its appreciation is limited by rising expectations that the Federal Reserve will cut interest rates twice this year due to easing inflationary pressures. This outlook keeps a lid on the Greenback’s gains.
• BoE Policy: The GBP/USD pair's downside remains capped by uncertainty surrounding the Bank of England's (BoE) February rate decision. While mixed UK data has fueled speculation of a possible rate cut, the lack of clarity on policy direction prevents further bearish moves.
• Economic Data: Traders await the BoE's Quarterly Bulletin for insights into the central bank's outlook. On the US side, Monday's economic docket includes Durable Goods Orders, the Conference Board's Consumer Confidence Index, and the Richmond Manufacturing Index, all of which could impact GBP/USD.

Closing statement: The GBP/USD pair remains sensitive to developments in both US and UK monetary policy. While the USD benefits from near-term risk aversion, expectations of Fed rate cuts limit its strength. Meanwhile, uncertainty around the BoE's stance keeps GBP/USD in a tight range, with key US data and the BoE Bulletin likely to provide short-term direction.

• Gold Prices: Gold prices started the week on a weaker note, trading lower as the US Dollar staged a modest recovery. However, market expectations of Federal Reserve rate cuts and declining US bond yields are likely to limit the Greenback’s upward momentum, offering potential support for gold.
• Geopolitical Uncertainty: Risk sentiment worsened after US President Donald Trump imposed a 25% tariff on all Colombian imports in response to a diplomatic dispute. This geopolitical tension increases demand for safe-haven assets like gold but failed to offset the broader price decline.
• Chinese Manufacturing Data: China's January manufacturing PMI unexpectedly contracted, coming in at 49.1, signaling economic weakness. This added to the overall risk-off tone in financial markets, indirectly supporting gold as investors weigh global economic risks.
• US PMI Data: A series of weak US economic data, including PMI figures, strengthened market expectations for two Federal Reserve interest rate cuts this year. This dovish outlook could weigh on the USD and lend support to gold in the medium term.
• Upcoming Events: Later today, market participants will monitor Trump’s tariff policies and their impact on risk sentiment, which may indirectly influence gold prices. Additionally, US New Home Sales data could offer further clues about the economy’s strength and its implications for the Fed’s policy trajectory.

Closing statement: Gold prices face near-term pressure amid a USD rebound but remain underpinned by expectations of Fed rate cuts and global economic uncertainty. Key levels to watch include immediate support near $2,690 per ounce and resistance around $2,790. Investors should track geopolitical developments and upcoming US economic data to gauge the asset's next move.

• WTI Oil Prices: West Texas Intermediate (WTI) crude oil reversed previous session gains, trading around $74.20 per barrel on Monday.
• Trump's Pressure: The drop is attributed to concerns over trade tensions as US President Donald Trump called on OPEC+ to reduce crude prices, adding pressure to the energy market.
• Geopolitical Risks: President Trump's warning of taxes, tariffs, and sanctions on Russia and other countries involved in the Ukraine conflict has further increased geopolitical risks. Such uncertainties weigh on crude oil prices as investors assess potential disruptions to global supply chains.
• Colombian Tariff Announcement: The announcement of a 25% tariff on Colombian goods, with a threat to escalate it to 50%, has raised concerns about disruptions in crude supply. The US imports 41% of Colombia’s crude exports, equating to 183,000 barrels per day (bpd) in 2024, making this development significant for market stability.
• Colombia’s Concession: In a surprising development, the White House announced Colombia’s agreement to US terms, including accepting deported migrants. This diplomatic resolution may ease immediate supply concerns, but market participants remain cautious regarding further geopolitical moves.

Closing statement: Crude oil prices are under pressure due to geopolitical tensions and trade uncertainties. WTI’s immediate support lies near $73.50, with resistance at $74.80. Further developments in US trade policies, OPEC+ actions, and geopolitical events will dictate the short-term trajectory of crude oil prices.

• DAX Price: The DAX slipped 0.08% on Friday, closing at 21,395, just below Thursday’s record of 21,521. Despite achieving new highs during the session, a late pullback marked the end of the seven-day winning streak, reflecting investor caution amid persistent global uncertainties.
• German PMI Data: German private sector data provided some optimism as the HCOB Services PMI climbed to 52.5 in January, up from 51.2 in December. The manufacturing sector also showed signs of recovery, with contraction moderating. These developments tempered expectations for aggressive European Central Bank (ECB) rate cuts.
• US Tariff Threats: Ongoing US tariff threats, despite President Trump’s softened stance on China, added to market uncertainties. Trade tensions and their potential impact on the global economy remain key risk factors for the DAX and broader markets.
• Ifo Business Climate: Germany’s Ifo Business Climate Index, due Monday, is expected to dip slightly from 84.7 in December to 84.6 in January. Investors will watch closely for signs of economic resilience or further deterioration as the index serves as a key indicator of German business sentiment.
• US Data: Monday’s US economic releases, including the Chicago Fed National Activity Index and Dallas Fed Manufacturing Index, will provide insights into the health of the US economy. Higher-than-expected figures could bolster expectations for a hawkish Federal Reserve, influencing global equity markets.

Closing statement: The DAX remains near record highs despite a minor pullback, supported by positive domestic PMI data. However, global trade tensions and mixed economic signals from the US could influence sentiment. Immediate resistance lies at 21,520, while support is seen near 21,300. Investors will closely monitor German and US economic data for cues on future market direction.