The pound has tumbled to its lowest level since November 2023, reflecting growing concerns over the UK’s public finances.
Sterling dropped more than 0.5%, falling to $1.2128 against the dollar, its weakest point in 14 months. Traders are betting that the value of the pound will fall by as much as 8%.
CCY – Delayed Quote • USD
1.2144 – (0.00%)
As of 9:14:40 GMT. Market open.
The euro is at its weakest since November 2022 at $1.0275.
Jamie Niven, a fund manager at Candriam, said that the outlook for the pound appeared bleak, saying that “the path of least resistance” would likely be further decline. He pointed to “very limited pricing in of Bank of England cuts,” alongside the ongoing fiscal issues, as factors weighing on the currency. “Fiscal concerns are also sterling negative,” Niven added.
Last week, Deutsche Bank urged investors to sell the pound, warning of the market volatility that has contributed to its recent weakness.
Economist Shreyas Gopal said: “There’s further to go in the recent pound weakness.”
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Investor sentiment has been shifting as demand for options trades on the pound has surged by 300%, according to Barclays. Mimi Rushton, head of currency distribution at the bank, said that hedge funds are betting on the pound’s continued weakness.
The pound’s struggles were compounded by a sell-off in UK government bonds, known as gilts, which pushed yields higher. The rise in yields is a reflection of investor unease about the UK’s fiscal health.
If the bond sell-off persists, it could prompt the Chancellor to reconsider her tax and spending plans, or risk breaching her fiscal rules. Chancellor Reeves has maintained her stance on the “non-negotiable” nature of these rules, despite the pressure on the currency.
The pound was also lower against the euro (GBPEUR=X), trading at €1.1893.
CCY – Delayed Quote • USD
1.1879 – (-0.26%)
As of 9:15:04 GMT. Market open.
Gold prices edged lower in early European trading as traders adjusted their expectations for US interest rate cuts, following stronger-than-expected nonfarm payrolls data that boosted the dollar.
The spot price lost 0.1% to $2,688.72 per ounce, while gold futures slipped by the same 0.1% margin to $2,711.50 per ounce.
IG market strategist Yeap Jun Rong hinted that weaker US economic data would be crucial to alleviating the pressure on gold. “Weaker US data ahead will be the much-needed catalyst here in taking some heat off the ‘economic resilience’ story and call for a meaningful reversal in yields,” he said. However, he cautioned that the data calendar for the week pointed to a “cautious outlook for now.”
Read more: FTSE 100 LIVE: Markets in the red as pound heads to lowest since 2023
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Traders have shifted their focus to the Federal Reserve’s upcoming meeting later this month, where they now expect the central bank to hold rates steady. Market expectations for only one rate cut in 2025, likely in June, have taken hold. Bank of America Global Research said: “After a very strong December jobs report, we think the cutting cycle is over.”
Despite the recent pullback, some analysts see a positive outlook for gold in 2025. Phillip Nova’s Priyanka Sachdeva believes the yellow metal could see further gains, stating that a sustained consolidation above the $2,700 level would allow gold bulls to target $3,000.
COMEX – Delayed Quote • USD
2,709.90 – (-0.19%)
As of 4:05:10 GMT-5. Market open.
Oil prices spiked to their highest levels in four months following the US Treasury Department’s imposition of additional sanctions on Russian oil on Friday.
Brent crude futures surged 1.6% to $81.04 per barrel, while US West Texas Intermediate (WTI) crude jumped 2.5% to $78.51.
The Biden administration unveiled its most extensive sanctions package to date, aimed at undermining Russia’s oil and gas revenues, which are seen as vital funding for its ongoing military campaign in Ukraine. The latest U.S. Treasury measures specifically target major Russian oil producers, including Gazprom, Neft, and Surgutneftegas, as well as 183 vessels linked to the transportation of Russian oil.
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These sanctions are expected to disrupt Russian oil exports significantly, forcing key importers such as China and India to explore alternative sources from regions including the Middle East, Africa, and the Americas.
“The new Russian sanctions from the outgoing administration are a net addition to at-risk supply, adding more uncertainty to the (first quarter) outlook,” RBC Capital Markets said.
In broader market movements, the FTSE 100 (^FTSE) was lower this Monday morning, trading at 8,220.19 points. For more details check our live coverage here.
NY Mercantile – Delayed Quote • USD
81.33 – (+1.97%)
As of 4:05:09 GMT-5. Market open.
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