Daily Analysis 31/01/2025

• GBP/USD Price: The GBP/USD pair was last seen trading around 1.2440, where the Fibonacci 50% retracement level of the latest downtrend and the 200-period Simple Moving Average (SMA) converge, indicating a critical support zone.
• BoE Rate Cut: The Pound Sterling remains under pressure as traders brace for the Bank of England (BoE) to potentially restart its rate-cut cycle at next week’s policy meeting. Softer UK economic data has reinforced expectations for monetary easing.
• Trump Tariff Threat: Late Thursday, US President Donald Trump reaffirmed his plan to impose a 25% flat tariff on all goods imported from Canada and Mexico, citing fentanyl concerns. The tariff threats add uncertainty to global trade dynamics and could impact market sentiment.
• US Jobless Claims: Initial Jobless Claims for the week ending January 24 came in at 207K, below the expected 220K and an improvement from the previous week’s 223K. The data suggests continued strength in the US labor market, supporting the US Dollar.
• US Economic Data: Investors now await major US data releases later on Friday, including the Personal Consumption Expenditures (PCE) Price Index, Personal Income and Spending figures, and the Chicago Purchasing Managers' Index (PMI), which could drive further movement in GBP/USD.

Closing statement: Sterling remains under pressure amid BoE rate cut expectations, while a stronger US labor market and Trump’s tariff rhetoric support the Dollar. Key US data releases will likely determine the next directional move for the pair.

• Gold Price: Gold price is in a bullish consolidation phase after reaching a fresh all-time high on Friday. However, rebounding US bond yields and a firmer US Dollar are capping further upside for the XAU/USD pair.
• US Dollar: The US Dollar has retained its weekly recovery gains from a one-month low, supported by rising bond yields. Additionally, a generally positive tone in equity markets is reducing safe-haven demand, keeping Gold’s rally in check.
• Trump’s Tariff Threats: President Donald Trump reiterated his threat of imposing 100% tariffs on BRICS nations if they attempt to replace the US Dollar in global trade. This geopolitical uncertainty has fueled demand for traditional safe-haven assets, including Gold, Japanese Yen, and US government bonds.
• Fed Rate Cuts: The US Federal Reserve held interest rates steady in its latest policy decision and indicated it will not rush to cut borrowing costs until inflation and labor market conditions justify easing. This stance supports the US Dollar, weighing on Gold’s upside.
• US Core PCE Data: Investors are now awaiting the release of the core Personal Consumption Expenditures (PCE) Price Index— the Fed’s preferred inflation gauge— for further clarity on the central bank’s next moves, especially after the US economy showed a larger-than-expected slowdown in Q4 2024.

Closing statement: Gold remains supported by geopolitical risks and Fed rate-cut bets but faces resistance from a stronger US Dollar and higher bond yields. Upcoming US inflation data will likely determine the next price action for XAU/USD.

• WTI Price: West Texas Intermediate (WTI) crude oil prices recover from recent losses, trading around $73.30 per barrel during European market hours on Friday. The rebound is driven by renewed concerns over potential supply disruptions.
• Trump’s Tariff Plans: Market participants are assessing the risk of a 25% tariff on Mexican and Canadian crude exports to the US, as proposed by President Donald Trump. Both countries are among the largest crude suppliers to the US, raising concerns over potential disruptions.
• China Tariffs: Trump has also signaled that his administration is actively working on tariffs targeting China, the world’s largest oil importer. This move adds another layer of uncertainty to global trade flows and energy demand expectations.
• OPEC+ Meeting: Investors are looking ahead to the February 3 OPEC+ meeting, where the group is expected to maintain its current supply policy. Trump has been pressuring OPEC, particularly Saudi Arabia, to lower oil prices, but any potential production increases may not take effect until April.
• Kazakhstan Signals: Kazakhstan’s energy minister stated that OPEC+ members will discuss Trump’s push to increase US oil production and aim for a unified stance during next week’s meeting. This meeting will be critical in shaping market sentiment for crude oil prices.

Closing statement: WTI crude oil prices remain volatile amid geopolitical risks, Trump’s tariff threats, and upcoming OPEC+ policy decisions. Traders will closely monitor developments from the February 3 meeting for clarity on supply adjustments and potential price impacts.

• DAX Price: The DAX rose 0.41% on Thursday, adding to Wednesday’s 0.97% gain, closing at a high of 21,727. Softer-than-expected Euro area economic data supported expectations of further European Central Bank (ECB) rate cuts to bolster growth.
• GDP Data: Germany’s economy contracted by 0.2% quarter-on-quarter in Q4 2024 after modest 0.1% growth in Q3. This slowdown also dragged down the broader Eurozone economy, which stagnated in Q4 after a 0.4% expansion in Q3 2024.
• ECB Rate Cut: The ECB reduced interest rates by 25 basis points to 2.9% on January 30. President Christine Lagarde emphasized further economic weakness, increasing the likelihood of additional rate cuts to support growth.
• German Retail Sales: Retail sales in Germany dropped by 1.6% in December, following a 0.6% decline in November, missing expectations for a 0.2% increase. Weak consumer spending could further justify ECB policy easing in the coming months.
• Key Data: On Friday, German inflation figures will be closely monitored, with economists expecting the annual rate to hold steady at 2.6%. Additionally, Germany’s unemployment and retail sales data will provide further insight into the economic outlook and ECB rate path.

Closing statement: The DAX continues to benefit from expectations of ECB rate cuts despite weak German economic data. Investors will focus on inflation and employment figures to gauge the likelihood of further monetary easing.