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BoC’s March 12 Summary of Deliberations revealed that the decision to cut the policy rate by 25 bps to 2.75% was driven primarily by "tariff threats and elevated uncertainty".

Governing Council members acknowledged that, under normal circumstances, holding the rate at 3% would have been appropriate. However, the impact of steel and aluminum tariffs, additional tariff threats, and the unpredictable stance of the US administration had begun to materially affect business and consumer decisions. This was "significantly weakening the near-term outlook".

Looking ahead, BoC emphasized the complexity of the situation and the fluid nature of trade tensions. "It would not be appropriate to provide guidance on the future path for the policy interest rate," the minutes noted.

Full BoC minutes here.

St. Louis Fed President Alberto Musalem warned that while the initial effects of import tariffs may be short-lived, their broader inflationary impact could linger. He stressed concern that underlying inflation may be influenced more persistently than expected, and if so, Fed might have to consider a tighter policy stance.

Although this isn’t his baseline scenario, Musalem emphasized that the Fed must remain vigilant to second-round effects from tariffs.

He noted that if inflation stays above the 2% target and the economy remains strong, the current “modestly restrictive” monetary stance would need to be maintained longer.

More significantly, "If the labor market remains resilient and the second-round effects from tariffs become evident, or if medium- to longer-term inflation expectations begin to increase actual inflation or its persistence, then modestly restrictive policy will be appropriate for longer or a more restrictive policy may need to be considered," he said.

• Gold prices faced resistance despite tariff threats, failing to reach previous highs.
• Gold ETFs saw their largest single-day increase since 2022, indicating strong demand.
• US economic data had a short-term impact on prices, but haven demand remains elevated.

Gold prices failed in their attempt to print a fresh weekly high today despite the latest tariff threats by US President Donald Trump. Markets rallied to peak just above the $3030/oz but fell short of yesterday's highs around $3036/oz.

ETF Flows Record Largest Daily Increase Since 2022

In last week's Gold article titled Gold Price Outlook: ETF Flows, Central Bank Buying, and XAU/USD Price Targets , we did take a look at Gold ETF flows. This is now back in focus following a significant uptick in ETF flows yesterday.

Gold exchange-traded funds (ETFs) added 23 tonnes of gold in a single trading session, marking the largest one-day increase since 2022. During the first quarter of 2025, gold-backed ETFs have gained around 155 tonnes overall, pushing total holdings to their highest level since September 2023. If this pace continues, it could also play a role in supporting higher gold prices.

As mentioned last week, despite the significant inflows this year current holdings still remain below the record levels reached in 2020. This leaves the door open for further additions which at this stage cannot be ruled.

Uncertainty surrounding US President Trump’s trade policies remains a key factor, and concerns over trade and tariffs are likely to keep boosting gold prices and keep demand elevated.

Tariff Talk and US Data

Gold benefitted earlier in the day after United States (US) President Donald Trump mentioned on Tuesday that Copper tariffs will be implemented in the coming weeks, which is far sooner than markets were anticipating.

US data followed in the US session and saw Gold prices drop back below the $3020/oz handle.

Orders for durable goods made in the US went up by $2.7 billion, or 0.9%, in February 2025 compared to the previous month. This followed a bigger-than-expected rise of 3.3% in January and surprised analysts who had predicted a 1% drop. The total value of orders reached $289.3 billion.

The positive data helped the US Dollar and seemed to weigh on Gold prices. However as i have said over the past few weeks, data releases appear to be having short-term effects on the Gold price in particular with haven demand remaining elevated.

This trend is likely to continue with US PCE data on Friday. Is there a chance of a pullback in Gold prices? The answer is yes, most definitely. However, any such move may prove short-lived and present an opportunity for buyers to join the trend once more.

Technical Analysis - Gold (XAU/USD)

From a technical analysis standpoint, Gold prices have failed to record a daily candle close above the 3025 resistance handle since Monday.

This does leave the precious metal vulnerable to further downside but this has been limited so far.

Looking at the four-hour chart (H4) below, Gold does appear to be rangebound between the 3004 and 3030 handles respectively.

A four-hour candle close above or below this block of consolidation could lead to a sharp move for Gold prices.

Immediate support rests at 2982 and 2950 if the lows at 3004 are breached.

On the upside immediate resistance rests in the 3025-3030 range before the 3050 and 3075 handles come into focus.

Gold (XAU/USD) Daily Chart, March 25, 2025

Source: TradingView

Support

• 3004
• 2982
• 2950

Resistance

• 3025
• 3050
• 3075

GBPUSD: ⬇️ Sell

•  GBPUSD reversed from resistance area
•  Likely to fall to support level 1.2800

GBPUSD recently reversed down from the resistance area between the resistance level 1.3035 (which has been reversing the price from October), resistance trendline of the daily up channel from January and the upper daily Bollinger Band.

The downward reversal from this resistance area created the daily Japanese candlesticks reversal pattern Evening Star which started the active wave 3.

GBPUSD can be expected to fall to the next support level 1.2800, the former monthly high from December.

WTI crude oil: ⬆️ Buy

• WTI crude oil broke resistance area
• Likely to rise to resistance level 71.00

WTI crude oil recently broke the resistance area between the resistance level 68.60 (top of the previous wave 1), resistance trendline of the daily down channel from February and the 50% Fibonacci correction of the downward impulse from last month.

The breakout of this resistance area accelerated the active impulse wave 3 of the higher impulse wave (3).

WTI crude oil can be expected to rise to the next resistance level 71.00, target price for the completion of the active impulse wave 3.

Markets

UK markets today at least got some distraction from the ongoing noise on the upcoming US tariffs with the UK February price data and the spring budget announced by UK Chancellor Reeves, including updated economic and fiscal forecasts from the Office of Budget Responsibility (OBR). February CPI at least gave some comfort. Headline CPI slowed more than expected at 0.4% M/M and 2.8% Y/Y (from 3.0%) as did core inflation (3.5% from 3.7%). At the same time, services inflation stayed elevated at 5.0%. This outcome rekindled some hope for the BOE to consider a additional rate cut at the May 8 meeting. The market raised chances for this to happen to 75% even as last week’s BOE minutes showed that only one MPC member already supported an additional step at that time. In its economic revision related to the spring fiscal update of the government, the OBR halved expected growth for this year to 1.0% before recovering to an average of 1.75% for the rest of the decade (1.9% next year). Inflation is expected to peak at 3.8% mid 2025, due to higher food and energy prices and persistently high wage growth, but should ‘rapidly’ return to the BoE target thereafter. The fiscal outlook also deteriorated, but OBR says that government policies, notably the direct savings from welfare reforms and the reduction in day-to-day departmental spending and the indirect boost to receipts from planning reforms, raise £14 billion in 2029-30, offsetting the underlying deterioration. The ‘combined’ market reaction to both the CPI data and Reeves’ spring budget can be considered as fairly constructive. The UK yield curve initially steepened after the CPI and before the budget (2-y -5.0 bps and 30-y -1.2 bps) but the curve flattened somewhat after its release. UK yields currently ease between 4.0 bps (2-y), 2.5 bps (10-y) and 5.0 bps (30-y). At least for now, the market doesn’t further question fiscal sustainability again. Still LT UK yield are holding near cycle top levels. The debate on BoE easing remains open. The OBR assessment of inflation returning to 2.0% next year at least doesn’t complicate the BoE framework. On FX markets, sterling declined after the CPI (both against USD and euro). USD strength currently prevails with cable trading near 1.289. EUR/GBP tested the 0.8375 area in morning trading. The reaction to the budget was limited. EUR/GBP pair trades near 0.836, mainly on a soft euro.

On other core markets, US and EMU interest rates again show a divergent pattern. The US yield curve steepens with yields trading from unchanged (2-y) tot +3.75 bps. US durable goods orders were solid (0.9% orders and shipments non-defense ex aircraft). EMU yields still are tentatively oriented south (German 2-y -2.3 bps, 30-y +0.5 bp). EUR/USD reversed an intraday dip near 1.077, but holds below the 1.08 mark. Equities mostly are trading in red (S&P 500 -0.35%, EuroStoxx 50 -0.78%).

News & Views

Sweden is raising its defense spending plans to 3.5% of GDP by 2030, the Swedish prime minister Kristersson announced today. Spending has so far projected to reach 2.4% by end this year and 2.6% in 2028 but the government has acknowledged that more needs to be done given uncertainty surrounding the US’ commitment to NATO. Sweden is anticipating on beliefs that NATO will soon set a goal for member states to ramp up spending between 3% and 4%. The country’s low public debt leaves it in a better position to raise military spending than many other European peers while also having sizeable (relative to GDP) industrial capacity to help bring about a full-fledged European defense apparatus. That, combined with the Riksbank having ended the easing cycle has jolted the SEK over recent weeks. EUR/SEK yesterday hit a new 2.5 year low (SEK high) around 10.83 and is holding on to those gains today.

The Czech National Bank as expected left the policy rate unchanged at 3.75%. The board recently clearly hinted at such an outcome, forged amongst others by better than expected Q4 growth figures, still above-target inflation and surprisingly strong wage data. The CNB governor will deliver a press conference later today and his assessment of recent domestic macro figures is one of the key elements to watch for, along with a review of the implications of the external environment and geopolitical risks & his assessment of the new level of the neutral (terminal) interest rate. KBC Economics expects one final rate cut in May to 3.5% with an outside chance for another fine-tuning cut should inflation recede faster and/or economic growth slow more than expected. The Czech crown enters the presser slightly weaker with EUR/CZK near 24.92. That’s still among the strongest CZK levels in nine months, though.

The British pound is lower on Wednesday following the UK inflation report. In the European session, GBP/USD is trading at 1.2897, down 0.36%.

UK inflation surprises on the downside at 2.8%

UK inflation for February rose 2.8% y/y, below the market estimate of 2.9%. This was lower than the 3% gain in January. The main contribution to the drop in inflation was lower prices for clothing and housing. On a monthly basis, CPI rose 0.4%, up from 0.1% in January but lower than the market estimate of 0.5%. Core CPI also eased, falling from 3.7% to 3.5%.

The drop in inflation is good news but the Bank of England remains concerned about the upside risk of inflation. Services inflation, which has been sticky, was unchanged at 5%.

The BoE will consider a rate cut at the next meeting in May, but will be monitoring the effects of increased employer taxes starting in April as well as today's Spring Statement.

At last week's meeting, the BoE expressed concern over worsening "global trade policy uncertainty" and pointedly mentioned US tariffs. The Trump administration's new trade policy has raised trade tensions and a global trade war would hurt growth and boost inflation.

Finance Minister Reeves announces deep spending cuts

The slight drop in inflation is also good news for Finance Minister Rachel Reeves, who delivered the budget update today. The update did not contain any further tax increases and announced deep spending cuts. Borrowing a phrase from the Bank of England at last week's meeting, Reeves said "increased global uncertainty" had increased borrowing costs and led to economic instability.

GBP/USD Technical

• GBP/USD has pushed below support at 1.2940. The next support level is 1.2864
• There is resistance at 1.2940 and 1.2991

UK consumer inflation was weaker than expected. The annual rate of price increases slowed to 2.8% from 3.0%. It remains well above the local low of 1.7% recorded in September. The latest deceleration is still more of a hope than a signal that inflation is slowing, as the previous reading was the highest since March 2024.

However, the downside surprise may allow the Bank of England to return to cutting interest rates sooner and maintain the pace of quarterly cuts.

The GBPUSD reacted to the weaker-than-expected data by falling around 0.5% to 1.2885 before stabilising around 1.2900. Technically, the Pound is at risk of a correction (at least) after a 7.5% rally from the January lows. In the middle of last week, the GBPUSD stalled near 1.3000, clearly reluctant to cross the psychologically important line without fundamental support and amid accumulated local overheating.
Pound is at risk of a correction after a 7.5% rally from the January lows, helped by the data

Possible correction targets are 1.2800 and 1.2650. The 200-day moving average and 76.4% retracement level lie around the former. The 50-day average and 61.8% level cross the latter.

WTI oil price continues to trend higher for the sixth consecutive day and hit the highest in three weeks on Wednesday.

Stronger than expected drop in US crude stocks last week (API report) contributed to the latest acceleration higher, as oil remains supported by growing concerns about potential supply shortage, following a threat from the US of imposing sanctions to those buying oil from Venezuela, with China being top buyer of Venezuelan oil.

The recent new round of US sanctions on Iran’s oil sales, further complicated the situation, as China is also the biggest buyer of crude oil from Iran.

Decision of OPEC+ to further rise output from May and positive signals from peace talks between Russia, US and Ukraine, would partially offset bullish signals and likely limit current rally.

Bulls pressure psychological $70 resistance and eye also significant barriers at $70.70 zone (Fibo 38.2% of $79.35/$65.22 downtrend / 100DMA), where stronger headwinds could be expected, as daily studies are overbought, and indicators are currently providing mixed signals.

Fundamentals are expected to remain the strongest driver of oil prices, with focus on US tariffs and sanctions, which are likely to play a key role.

Violation of $70.00/70 zone to generate stronger bullish signal and open way for further rise of oil prices, while failure here would be an initial negative signal, which would need verification on drop below $68.55/00 zone (broken Fibo level / converged 10/20DMA’s.

Res: 70.00; 70.70; 71.00; 71.34.
Sup: 69.05; 68.55; 68.00; 67.79.