GBP/USD, DAX Forecast: 2 Trades to Watch

The immediate market split is between an oil-positive geopolitical shock and a rates/FX regime that is still being priced too aggressively. Higher energy is a tax on Europe first: it tightens real incomes, delays consumer recovery, and raises the odds that cyclical European equities get multiple compression even if headline indices look resilient. The cleaner second-order winner is not broad Europe but oil infrastructure, tanker names, and select defense/industrial beneficiaries tied to energy security capex.

For sterling, the key point is that the inflation impulse is being driven by imported energy rather than domestic demand, so it is mechanically stagflationary and not a clean reason for the BoE to hike. That makes the market’s pricing of near-term tightening vulnerable if labor softness persists; in that setup, GBP/USD can hold elevated for a few sessions on dollar weakness, but the medium-term path is more likely range-bound to lower unless the Fed clearly turns dovish. The asymmetric risk is that any further oil spike re-prices UK inflation expectations upward without improving growth, which is usually bearish for GBP crosses against low-beta funding currencies.

The DAX rally is more fragile than the tape suggests because it is being supported by a relief bid in risk assets rather than an earnings revision story. If the Strait of Hormuz remains closed, the market will eventually have to reprice transport, chemicals, autos, and capex-heavy industrials that are most exposed to input-cost inflation and export-demand erosion. That makes the current move a candidate for fade on strength unless there is visible de-escalation and confirmation that energy flows normalize within days, not weeks.