Pound (GBPUSD=X)
The British pound remained relatively stable against the U.S. dollar, trading at $1.3054 during early European sessions. This level is close to last week’s one-month low of $1.3011.
David Song, a strategist at Forex.com, noted that “GBP/USD may no longer track the positive slope in the moving average as the Bank of England (BoE) shows a greater willingness to further unwind its restrictive policy.” He highlighted that upcoming economic data from the UK could significantly influence the central bank’s decisions on monetary policy.
The pound has emerged as the best-performing major currency of 2024, primarily due to the BoE’s cautious approach to interest rate cuts. However, a potential risk to this upward trend is the possibility of accelerated cuts, contingent on forthcoming economic indicators.
On a more positive note, sterling gained 0.2% against the euro (GBPEUR=X), reaching €1.1988. This increase followed a report from the Office for National Statistics (ONS) showing that wage growth met expectations, coupled with a decline in the UK unemployment rate.
Gold (GC=F)
Gold prices were largely unchanged on Tuesday as the U.S. dollar maintained strength, with investors eagerly awaiting insights into the Federal Reserve’s future interest rate policy.
At the time of writing, spot gold was trading at $2,651.63 per ounce, reflecting a modest increase of 0.3%. Meanwhile, U.S. gold futures remained flat at $2,666.40.
Despite this stability, the overarching narrative for gold is one of resilience. According to Yeap Jun Rong, a market strategist at IG, “The yellow metal is holding strong even in the face of dollar strength.”
Looking ahead, uncertainty surrounding the U.S. elections could boost demand for gold as a safe-haven asset. Yeap suggested that anticipated Fed rate cuts, likely in increments of 25 basis points, could propel gold prices to new heights, potentially targeting $2,800 by the end of the year.
Federal Reserve governor Christopher Waller has urged “more caution” regarding rate cuts, while Minneapolis Fed president Neel Kashkari indicated that further reductions are likely as the central bank approaches its 2% inflation target.
Current market sentiment reflects an 87% probability of a 25-basis-point cut in November, which could enhance the appeal of non-yielding bullion, as lower interest rates typically boost gold’s attractiveness.
Oil (BZ=F)
Oil prices faced their most significant decline in a month following reports that Israeli Prime Minister Benjamin Netanyahu assured U.S. President Joe Biden that Israel would not retaliate against Iran’s crude or nuclear facilities after a recent missile attack.
Brent crude futures dropped 3.6%, settling at $74.62 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 3.97%, trading at $70.90 per barrel during early European trading. This decline was prompted by a Washington Post report detailing Netanyahu’s commitment to focus on Iran’s military rather than its oil and nuclear sectors.
The sell-off was further exacerbated by concerns over China’s economic outlook, especially after Beijing did not announce any new stimulus measures during a weekend briefing.
Kathleen Brooks, research director at XTB, noted the recent volatility in oil prices, which have been influenced by ongoing tensions in the Middle East. She explained, “The latest news suggests that Israel will not directly target Iran, leading to a reduction in the escalation premium that had been priced into oil.”
Brooks also cautioned that this development could negatively impact oil companies listed on the FTSE 100, which may experience further declines in the energy sector after its performance as one of the weakest market segments on Monday.
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