Sterling Stability Amidst Uncertainty
In early European trading, the British pound held steady against the US dollar at $1.3054, close to its recent low of $1.3011. The currency has been influenced by the Bank of England’s (BoE) cautious approach to interest rate cuts, with potential future cuts dependent on economic data. David Song, a strategist at forex.com, highlighted that the positive slope in the moving average of GBP/USD may shift as the BoE considers unwinding its restrictive policy.
While the pound has been the best-performing major currency in 2024, there are risks to its upward trajectory if the BoE accelerates rate cuts. However, recent ONS data showing wage growth meeting expectations and a decline in UK unemployment rate have provided some support to the currency.
Gold Prices Holding Firm
Gold prices remained stable as the US dollar showed strength, with spot gold trading at $2,651.63 per ounce and US gold futures at $2,666.40. Yeap Jun Rong, a market strategist at IG, noted that despite dollar strength, gold has maintained its resilience and remains close to recent record highs.
Looking ahead, the uncertainty surrounding the US elections and potential Fed rate cuts could drive demand for gold as a safe-haven asset. Yeap suggested that gold prices might reach $2,800 by the end of the year with anticipated 25-basis-point rate cuts.
Oil Prices Suffer Sharp Decline
Oil prices experienced a significant drop following reports that Israel would not retaliate against Iran’s crude or nuclear facilities. Brent crude futures fell by 3.6% to $74.62 a barrel, while US West Texas Intermediate (WTI) crude dropped 3.97% to $70.90 per barrel. Concerns over China’s economic outlook and lack of new stimulus measures contributed to the sell-off.
Kathleen Brooks from XTB highlighted the impact of Israel’s decision on oil prices, mentioning that the reduction in escalation premium could negatively affect oil companies on the FTSE 100. The FTSE 100 itself opened lower, slipping 0.1% to 8,281 points.
Overall, the markets remain sensitive to geopolitical developments, economic data, and central bank policies as investors navigate uncertainties in various asset classes.
