The British pound has maintained its steady pace against the dollar in early European trading, hovering around $1.2673.
Market Focus Shifts to Monetary Policy Hearings
Market attention is primarily focused on the upcoming monetary policy hearings, where several Bank of England (BoE) policymakers, including Governor Andrew Bailey, will answer questions from the Treasury committee about recent decisions regarding interest rates.
Interest Rate Cuts: A Likely Outcome?
Traders are pricing in an 80% likelihood that the BoE will cut interest rates by 25 basis points to 4.50%, according to Reuters. This would mark the second consecutive rate cut by the Bank and the third such reduction this year.
Key Indicators for Interest Rate Decision-Making
Also on the horizon is Wednesday’s release of service sector inflation data, a key indicator closely monitored by BoE officials in their interest rate decision-making process.
GBP-USD Gains: A Temporary Measure?
‘GBP-USD has gained some ground after putting in a floor at 1.26, but this looks to be some giveback on the long dollar Trump trade, rather than a more optimistic assessment of the UK growth outlook,’ Neil Wilson, chief market analyst at Finalto, said.
Sterling Against the Euro
Meanwhile, against the euro (GBPEUR=X), sterling was marginally higher, trading at €1.1971.
Gold Prices Rebound After Weekly Decline
Gold prices rebounded on Tuesday after suffering their largest weekly decline since 2021, as traders recalibrated expectations for future US Federal Reserve rate cuts.
Monetary Policy Outlook Influenced by Trump’s Return
The outlook for monetary policy has been influenced by the return of Donald Trump to the White House next year. COMEX – Delayed Quote•USD(GC=F)FollowView Quote Details2,692.40-+(0.75%)As of 1:45:48 PM EST. Market Open.Advanced Chart
Spot Gold Prices Increase
Spot gold rose 1.3% to $2,621.08 per ounce, while US gold futures edged 0.3% higher to $2,624.10 at the time of writing.
Potential Fed Rate Cut and Its Impact on Gold
The prospect of Trump’s policies potentially driving inflation has led swaps traders to predict a near 50% chance of a Fed rate cut next month, prior to his inauguration. This could benefit gold, as lower interest rates make the non-yielding metal more attractive.
Technical Analysis: Gold’s Potential for Further Gains
‘Whether the Federal Reserve cuts or not, I think gold technically looks like it wants to get back near that $2,700 level,’ Daniel Pavilonis, senior market strategist at RJO Futures, told Reuters.
Gold Becomes More Accessible to Investors
The pause in the US dollar’s rally, which recently surged to a one-year high before retreating, has also made gold more accessible to investors. Goldman Sachs, in its 2025 commodity outlook, highlighted gold as a top pick, suggesting the precious metal could see further gains during Trump’s presidency.
‘Go for Gold’ – Analysts’ Recommendation
‘Oil (BZ=F)Oil prices were lower on Tuesday, following a strong rally the previous day. The rally was spurred by a halt in production at Norway’s Johan Sverdrup oilfield, as well as ongoing concerns over the Russia-Ukraine conflict.’
Brent Crude Futures Lose 0.2%
Brent crude futures lost 0.2%, trading at $73.14 per barrel, while US West Texas Intermediate (WTI) (CL=F) slipped 0.4% to $68.90 per barrel at the time of writing.
Geopolitical Risks Weigh Heavily on Markets
The production stoppage at Johan Sverdrup, Western Europe’s largest oilfield, was triggered by a power outage, while reduced output from the Tengiz field in Kazakhstan further supported prices. Geopolitical risks also weighed heavily on markets, particularly following the US decision to permit Ukraine to carry out long-range missile strikes on Russian targets.
Market Movements: FTSE 100 Opens Higher
In broader market movements, the FTSE 100 (^FTSE) opened higher, climbing 0.2% to 8,127 points. For more details check our live coverage here.