Thursday, December 19, 2024

Today’s pound, gold and oil prices in focus: commodity and currency check, 8 October

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The pound dropped by about 0.1% against the US dollar on Tuesday, at 1.30, the lowest value in more than three weeks. The slip reflects a shift in investor sentiment, with traders paring back their bets on sterling in favour of the safe-haven US currency.

This trend has been bolstered by robust US economic data and hawkish comments from the Federal Reserve, contrasting sharply with the dovish stance expressed by Bank of England governor Andrew Bailey.

Investor unease is further exacerbated by the upcoming government budget announcement later this month, raising concerns about potential tax hikes and spending cuts.

Meanwhile, the US Dollar Index (DX-Y.NYB), which gauges the dollar’s strength against six major currencies, has extended its winning streak for six consecutive trading days, surpassing the 102 mark.

Read more: FTSE 100 LIVE: Stocks decline across Europe as UK borrowing costs escalate

Looking ahead, investors will focus on the US Consumer Price Index (CPI) data for September, set to be released on Thursday. This inflation data is expected to shed light on the Federal Reserve’s potential interest rate decisions in November.

Sterling was also lower against the euro (GBPEUR=X) in early trading, slipping 0.1% to €1.19.

Gold prices have slipped for the fifth consecutive day, hitting an over one-week low during early European trading on Tuesday, edging closer to the critical $2,630 support level.

At the time of writing, spot gold was down 0.3% at $2,635.43 per ounce, while US gold futures slipped 0.4% to $2,656.50.

This downward trend is largely attributed to diminishing expectations for a substantial interest rate cut by the Federal Reserve in November, which has undermined demand for the non-yielding yellow metal.

Despite this decline, gold’s downside remains somewhat cushioned by a modest weakening of the US dollar, which typically supports USD-denominated commodities.

Read more: Chancellor Reeves urged to change fiscal rules in budget to unlock £57bn

Geopolitical tensions, particularly ongoing conflicts in the Middle East, may also provide some support for gold prices as investors seek safe-haven assets. However, many traders are likely to adopt a cautious stance, refraining from making aggressive directional bets ahead of the upcoming release of the FOMC meeting minutes on Wednesday.

In addition, key economic indicators such as the US Consumer Price Index (CPI) and the US Producer Price Index (PPI), scheduled for release on Thursday and Friday respectively, are expected to influence short-term dollar dynamics and offer new momentum for gold prices.

Oil prices have slipped after hitting a six-week high but are still hovering around the $80 mark amid escalating fears over the conflict in the Middle East.

Brent crude futures dropped 1.5% to $76.69 a barrel, while US West Texas Intermediate (CL=F) crude fell 1.9% to $75.68 per barrel during early European trading.

Brent has been rising since Israel decided to take military actions against Hamas in Gaza, as well as tensions with Hezbollah in Lebanon and the Houthis in Yemen, all of which are linked to Iran. Since the attack on Israel on October 7 2023, these developments have served as catalysts for rising oil prices.

However, in recent weeks, the market had experienced some stability amid concerns about weakened global demand, particularly from China, and the potential risks of further disruptions to shipping in the oil-rich region.

Read more: Stocks to watch ahead of the October budget

But further gains in crude were held back by the dollar, as expectations of smaller US interest rate cuts boosted the greenback.

Traders were also watching for the reopening of Chinese markets after a week-long holiday, as the world’s biggest oil importer announced a slew of major stimulus measures.

Meanwhile, the FTSE 100 (^FTSE) was lower at the open, losing 1.2%% to 8,202 points. For more details check our live coverage here.

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