Daily Analysis 29/11/2024

• GBP/USD Gains: GBP/USD continues its upward momentum, trading above 1.2700 in Friday’s early European session. Positive sentiment around the pair has pushed it to a two-week high, signalling improved market confidence in the Pound Sterling.
• BoE Rate Expectations: Recent UK inflation data showing a pick-up in underlying price growth for October has led traders to scale back expectations of a near-term BoE rate cut. The BoE’s Financial Stability Report, due later on Friday, could provide additional insights into the central bank’s policy trajectory.
• Thin Liquidity: With US markets operating on shortened trading hours due to the Thanksgiving holiday, reduced market liquidity may heighten volatility. Large orders could disproportionately impact GBP/USD’s price movements during Friday's session.
• Limited UK Data: week, the UK economic calendar offers little in terms of high-impact data. As a result, traders are likely to focus on US economic indicators, particularly Friday’s Nonfarm Payrolls (NFP) report, which could drive USD sentiment and impact GBP/USD.
• Market Sentiment: While the Pound benefits from reduced rate cut bets, broader macroeconomic risks and the absence of significant UK data next week leave GBP/USD vulnerable to external factors, particularly US Dollar strength.

Closing statement: GBP/USD’s positive traction is supported by easing BoE rate cut bets and USD weakness, but thin liquidity and external events could introduce volatility. The pair’s trajectory will likely hinge on the BoE’s Financial Stability Report and next week’s US economic data.

• Gold Price: Gold (XAU/USD) gains significant upward momentum, reaching above $2,660 during Friday's European session. Renewed market demand for safe-haven assets and speculation over the Federal Reserve’s rate path support the rally.
• Fed Rate Cut: Despite this, traders continue to price in a 63% likelihood of a December Fed rate cut, adding to gold's appeal as a hedge against monetary policy uncertainty.
• Geopolitical Tensions: Reports of heightened tensions between Russia and Ukraine, with Russian President Putin threatening missile strikes on Kyiv, reignited safe-haven demand. This geopolitical backdrop further strengthens gold’s positive bias.
• US Dollar Weakness: A weakening US Dollar, partly driven by a sharp recovery in the Japanese Yen after hotter-than-expected Tokyo inflation data, provides additional support to gold. Expectations of Bank of Japan rate hikes next month have reinforced this dynamic, indirectly aiding XAU/USD.
• Holiday Trading: As US markets operate under thin liquidity due to the Thanksgiving holiday, gold traders should remain cautious. Any outsized orders could lead to exaggerated price swings, making the recovery momentum fragile.

Closing statement: Gold’s recovery is driven by geopolitical tensions, Fed rate cut expectations, and a weaker US Dollar. However, thin trading conditions during the holiday weekend could lead to heightened volatility, necessitating careful monitoring.

• WTI Trading: West Texas Intermediate (WTI), the US crude oil benchmark, holds steady near $68.80 in Friday’s session. The market remains cautious as traders weigh geopolitical risks and potential supply adjustments.
• Geopolitical Risks: The ongoing Russia-Ukraine conflict continues to present upside risks for WTI. Any escalation in hostilities could spark concerns about energy supply disruptions, particularly impacting winter gas flows to Central and Eastern Europe, supporting crude oil prices.
• Fed Rate Outlook: Recent US economic data indicating stagnation in inflationary progress has dimmed hopes of a swift Federal Reserve interest rate cut in 2025. This tempered sentiment might limit crude oil's upside as a less dovish Fed strengthens the US Dollar, impacting commodities priced in USD.
• OPEC+ Meeting Postponement: The delay of the OPEC+ December meeting raises questions about the group's production strategy. Speculation is growing around potential delays in planned production hikes or additional supply cuts, which could tighten the market and provide support to oil prices.
• China’s Demand: Chinese independent refiners are reportedly sourcing more oil from the Middle East and Africa as Iranian crude becomes scarcer and more expensive due to widening US sanctions. This shift in demand underscores China's critical role in shaping global crude oil trade flows.

Closing statement: Crude oil prices remain stable amid a balance of geopolitical risks and OPEC+ uncertainty. While potential supply disruptions and strategic production decisions could boost WTI, a cautious Fed outlook and thin trading conditions might keep volatility elevated in the near term.

• DAX Price: On Thursday, the DAX rose by 0.85%, rebounding from Wednesday's 0.18% loss. Optimism surrounding cooling inflation and improving sentiment in the banking sector helped propel the index closer to potential all-time highs.
• Banking Stocks: German banks outperformed, fueled by news that regulators removed Deutsche Bank's monitor. Deutsche Bank surged 1.94%, while Commerzbank gained 1.26%. This regulatory decision bolstered confidence in the banking sector, providing tailwinds for the broader market.
• German Inflation: Preliminary data shows Germany's annual inflation rose slightly from 2.0% in October to 2.2% in November. Although the figure surpassed the ECB's 2% target, it came in below forecasts of 2.3%, signaling continued moderation in price pressures.
• German Import Prices: German import prices fell by 0.8% YoY in October, marking a continued deflationary trend in input costs. Compared with the same month a year earlier, the rate of change was -1.3% in September 2024, and +0.2% in August 2024.
• German Retail Sales: Retail sales disappointed, declining 1.5% MoM in real terms, reflecting weakened consumer demand that could weigh on economic recovery. Nominal sales were 1.1% lower in October 2024 than in September 2024.

Closing statement: The DAX rallies on easing inflation and strong banking sector performance, signaling resilience. However, weaker retail sales and cautious economic indicators suggest investors should remain vigilant, particularly regarding consumer-driven sectors.