Daily Analysis 22/12/2025

• GBP/USD Price: GBP/USD clings to recovery gains near 1.3400 in early European trading, supported by a positive risk tone and a steady US Dollar as markets digest recent Fed and BoE decisions.
• Rate Cut: The Bank of England lowered its policy rate to 3.75% at last week’s meeting, marking the fourth cut this year and the lowest level since February 2023 amid easing inflation and slowing growth.
• GDP Confirmation: UK GDP growth was confirmed at just 0.1% QoQ for Q3 2025, in line with preliminary estimates, underscoring the economy’s fragile momentum, according to the ONS.
• Fiscal Debate: Chancellor Rachel Reeves has placed growth at the core of her fiscal strategy, though economists argue that current tax and spending plans may work against that objective.
• US Housing: US November existing home projects slipped to 4.13m versus 4.15m expected, with homebuilder stocks under pressure due to weak earnings and subdued forward guidance.

Closing statement: GBP/USD remains supported by improved risk sentiment, though limited UK growth, ongoing fiscal uncertainty, and resilient US macro conditions could cap upside momentum in the near term.

• XAU/USD Price: Gold surges to fresh all-time highs above $4,410 early Monday, supported by renewed geopolitical tensions and persistent safe-haven demand.
• Middle East: Israeli Prime Minister Benjamin Netanyahu said preparations are underway to brief US President Donald Trump on potential options for renewed strikes on Iran, according to Reuters, keeping regional risks elevated.
• Fed's Waller: Fed Governor Christopher Waller reiterated his dovish stance on interest rates during a CNBC forum, reinforcing expectations that monetary policy could remain supportive for non-yielding assets.
• Rate Outlook: The Fed’s dot plot signals a median expectation of just one additional rate cut in 2026, while the CME FedWatch tool shows a 79.0% probability of rates being held steady at the January meeting.
• Data Watch: Markets await the Chicago Fed National Activity Index later Monday, followed by Tuesday’s preliminary Q3 US GDP release, which could influence near-term rate expectations and gold’s momentum.

Closing statement: Gold remains firmly underpinned by geopolitical risk and accommodative policy expectations, though upcoming US macro data may drive short-term volatility around record levels.

• Crude Oil Price: West Texas Intermediate (WTI) trades around $57.10 during early European hours on Monday, stabilizing after recent volatility as traders assess supply-side developments.
• Venezuela Tensions: The US continues to pursue a third oil tanker near Venezuela, Reuters reported, as President Donald Trump intensifies an oil blockade against Nicolás Maduro’s government, keeping geopolitical risk premia in play.
• OPEC Capacity: The US Energy Information Administration revised higher its estimates of OPEC’s effective production capacity, suggesting stronger supply potential through 2026 and reinforcing longer-term oversupply concerns.
• Russia Revenues: Russia’s crude-related tax revenues are set to fall sharply, with January proceeds projected at around 380 billion rubles—the lowest since late 2022—highlighting mounting fiscal pressure amid weaker oil prices.
• Inventory Watch: Market participants look ahead to Tuesday’s API crude stockpiles report for fresh directional cues and confirmation of near-term supply-demand dynamics.

Closing statement: WTI remains caught between geopolitical supply risks and rising medium-term supply capacity, leaving prices vulnerable to data-driven swings in the near term.

• DAX Price: DAX 40 trades near 24,300 points after a strong rebound from support just below 24,000 points.
• Economic Outlook: Bundesbank forecasts gradual recovery with GDP growth of 0.6% in 2026, accelerating to 1.3% in 2027 and 1.1% in 2028, driven by higher public spending on defense and infrastructure.
• Employment Caution: German companies show hiring caution as the ifo Employment Barometer dropped to 91.9 in December, its lowest since May 2020, indicating ongoing job cuts.
• Export Impact: A Reuters-seen study reports German auto exports to the US fell nearly 14% in the first nine months, the sector hardest hit by US tariffs under President Trump.
• Fed Commentary: Cleveland Fed President Beth Hammack stated monetary policy is well-positioned to pause, awaiting the impact of recent 75 bps rate cuts during Q1 2026.

Closing statement: DAX gains reflect underlying optimism on economic recovery despite external challenges from trade tensions and cautious labor markets, with central bank actions closely watched.