Sterling was hovering around the flatline against the dollar in early European trading on Friday after rallying in the previous session, amid news of a significant boost to UK government investment potential in next week’s budget.
Investor sentiment was buoyant after it was reported that chancellor Rachel Reeves planned to change debt rules to allow her to spend an extra £50bn on infrastructure. This injection of funds could stimulate economic growth and provide support for the sterling in the long term.
Deutsche Bank senior strategist Jim Reid said: “The moves come ahead of the new government’s first budget next week, with chancellor Reeves confirming yesterday that the government would change the way it measures debt, in order to fund extra investment. This shift in fiscal policy could have a positive impact on the UK economy, potentially attracting more foreign investment and boosting consumer confidence.”
Despite the rally, sterling’s ascent has been tempered by disappointing UK economic data. Preliminary PMI data for October the previous session showed an unexpected slowdown in the service sector and a near-stagnation in manufacturing, clouding the outlook and exerting downward pressure on the pound. This data highlights the challenges the UK economy is facing and underscores the importance of government intervention to spur growth.
“GBP/USD tries to bounce off Wednesday’s $1.2908 low towards the psychological $1.3000 mark and its September low at $1.3022 which may now act as resistance, together with the July peak at $1.3045,” Axel Rudolph, market analyst at IG, wrote. This technical analysis provides insight into key levels that traders are watching to gauge the strength of the pound against the dollar.
Against the euro (GBPEUR=X), sterling was also muted, trading at €1.1982. This shows that the currency is facing challenges across multiple major currency pairs, indicating broader economic uncertainties affecting its performance.
Gold prices faltered on Friday as the US dollar regained strength amid changing expectations for Federal Reserve policy. Investors appear to be shifting focus from gold’s safe-haven appeal, eyeing economic indicators and a more stable dollar outlook as the Fed signals a potentially slower approach to future rate cuts. This shift in investor sentiment highlights the dynamic nature of financial markets and the impact of central bank policies on asset prices.
Spot gold was muted at $2,727.88 per ounce, while US gold futures slipped 0.3% to $2,748.80. The decline in gold prices underscores the current preference for riskier assets as investors become more optimistic about the economic outlook, reducing the demand for safe-haven assets like gold.
The dollar has rebounded after reaching a three-month high earlier this week, supported by speculation that the Fed may ease up on aggressive rate cuts. In a recent analyst note, a financial strategist said: “The data from the US continues to show economic resilience, which is lowering the market’s expectations for aggressive rate cuts.” This confidence in the US economy is driving the dollar higher and reshaping market expectations for future monetary policy actions.
This renewed confidence in the dollar has added pressure on gold, traditionally seen as a hedge against uncertainty. A stronger dollar typically reduces gold’s allure for investors, as it raises the opportunity cost of holding the non-yielding asset. This relationship between the dollar and gold prices is a crucial factor for investors to consider when making portfolio decisions.
Crude oil prices nudged higher on Friday, setting up Brent crude and US West Texas Intermediate (WTI) for a weekly gain of over 1% amid renewed tensions in the Middle East and the prospect of resumed ceasefire talks in Gaza. The geopolitical risks in the region are contributing to the volatility in oil markets, underscoring the close connection between geopolitical events and commodity prices.
Sterling was hovering around the flatline against the dollar in early European trading on Friday after rallying in the previous session, amid news of a significant boost to UK government investment potential in next week’s budget.
Investor sentiment was buoyant after it was reported that chancellor Rachel Reeves planned to change debt rules to allow her to spend an extra £50bn on infrastructure. This injection of funds could stimulate economic growth and provide support for the sterling in the long term.
Deutsche Bank senior strategist Jim Reid said: “The moves come ahead of the new government’s first budget next week, with chancellor Reeves confirming yesterday that the government would change the way it measures debt, in order to fund extra investment. This shift in fiscal policy could have a positive impact on the UK economy, potentially attracting more foreign investment and boosting consumer confidence.”
Despite the rally, sterling’s ascent has been tempered by disappointing UK economic data. Preliminary PMI data for October the previous session showed an unexpected slowdown in the service sector and a near-stagnation in manufacturing, clouding the outlook and exerting downward pressure on the pound. This data highlights the challenges the UK economy is facing and underscores the importance of government intervention to spur growth.
“GBP/USD tries to bounce off Wednesday’s $1.2908 low towards the psychological $1.3000 mark and its September low at $1.3022 which may now act as resistance, together with the July peak at $1.3045,” Axel Rudolph, market analyst at IG, wrote. This technical analysis provides insight into key levels that traders are watching to gauge the strength of the pound against the dollar.
Against the euro (GBPEUR=X), sterling was also muted, trading at €1.1982. This shows that the currency is facing challenges across multiple major currency pairs, indicating broader economic uncertainties affecting its performance.
Gold prices faltered on Friday as the US dollar regained strength amid changing expectations for Federal Reserve policy. Investors appear to be shifting focus from gold’s safe-haven appeal, eyeing economic indicators and a more stable dollar outlook as the Fed signals a potentially slower approach to future rate cuts. This shift in investor sentiment highlights the dynamic nature of financial markets and the impact of central bank policies on asset prices.
Spot gold was muted at $2,727.88 per ounce, while US gold futures slipped 0.3% to $2,748.80. The decline in gold prices underscores the current preference for riskier assets as investors become more optimistic about the economic outlook, reducing the demand for safe-haven assets like gold.
The dollar has rebounded after reaching a three-month high earlier this week, supported by speculation that the Fed may ease up on aggressive rate cuts. In a recent analyst note, a financial strategist said: “The data from the US continues to show economic resilience, which is lowering the market’s expectations for aggressive rate cuts.” This confidence in the US economy is driving the dollar higher and reshaping market expectations for future monetary policy actions.
This renewed confidence in the dollar has added pressure on gold, traditionally seen as a hedge against uncertainty. A stronger dollar typically reduces gold’s allure for investors, as it raises the opportunity cost of holding the non-yielding asset. This relationship between the dollar and gold prices is a crucial factor for investors to consider when making portfolio decisions.
Crude oil prices nudged higher on Friday, setting up Brent crude and US West Texas Intermediate (WTI) for a weekly gain of over 1% amid renewed tensions in the Middle East and the prospect of resumed ceasefire talks in Gaza. The geopolitical risks in the region are contributing to the volatility in oil markets, underscoring the close connection between geopolitical events and commodity prices.
