The pound has managed to stem losses, trading flat at $1.2217 in early European trading after facing a sharp sell-off in the last few trading days due to rising yields on UK gilts.
CCY – Delayed Quote • USD
1.2190 – (0.00%)
As of 9:29:40 GMT. Market open.
Goldman Sachs has said the sterling can steady from here, despite the risks. “While we acknowledge the wider distribution of risks, in our central view we are more inclined to push back on the extent of this week’s Sterling sell-off rather than to chase it further,” says Kamakshya Trivedi, analyst at Goldman Sachs in London.
The pound regained its footing as UK government bonds showed signs of stabilising, with yields on 10-year UK government bonds, down three basis points at 4.86%. Yields on long-dated gilts also edged lower, down four basis points at 5.4%.
However, sterling continues to face challenges after a turbulent period, having recently plunged to a 14-month low.
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Kathleen Brooks, research director at XTB, said: “UK asset prices face a tough test this week.
“Later this morning there is a £1bn sale of 30-year debt, the latest reading of CPI is released on Wednesday, there’s monthly GDP for November on Thursday and further debt sales out to the end of January.
“The chancellor is set to speak in the House of Commons on Tuesday, ostensibly about her trip to China, but she will likely be pressed on the sell-off in the pound and in UK bonds.
“So far, the Treasury have been keen to under play the relentless rise in UK bond yields, but the question is can she avoid the tough questions as she comes back to face the music?”
CCY – Delayed Quote • USD
1.1884 – (-0.22%)
As of 9:29:41 GMT. Market open.
The pound was down by 0.1% against the euro (GBPEUR=X), trading at €1.1899.
Gold prices were mixed this Tuesday morning amid expectations the US Federal Reserve will proceed with caution with cutting interest rates this year.
COMEX – Delayed Quote • USD
2,684.50 – (+0.22%)
As of 4:19:35 GMT-5. Market open.
The spot price lost 0.6% to $2,673.10 per ounce, while gold futures rose by 0.3% to $2,686.70 per ounce.
The stronger-than-expected US nonfarm payrolls (NFP) report has reinforced expectations that the Fed may pause its rate-cutting cycle later this month. This, in turn, has kept US Treasury bond yields elevated near their highest levels in over a year, with the US dollar also hovering close to a two-year peak. These factors are putting pressure on gold, a non-yielding asset.
“We had a better-than-expected US job report which strengthened the US dollar and the Treasury yields… (Gold’s) move lower here is some follow-through on the stronger than expected report,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.
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A stronger US dollar is making gold more expensive for overseas buyers, adding to the pressure on the precious metal.
Meanwhile, the political landscape in the US is shifting, with Donald Trump set to be sworn in as president next week. His proposed tariffs and protectionist trade policies are expected to be inflationary and could potentially trigger trade wars, further enhancing gold’s status as a safe-haven asset.
Investors will now turn to key economic data this week, including US inflation figures, weekly jobless claims, and retail for clarity on the state of the US economy and the Fed’s future policy decisions.
Oil prices have eased slightly but remain near four-month highs as Chinese and Indian buyers look for new suppliers following tougher US sanctions on Russian oil.
NY Mercantile – Delayed Quote • USD
81.05 – (+0.05%)
As of 4:19:39 GMT-5. Market open.
Brent crude futures fell 0.5% to $80.55 per barrel, while US West Texas Intermediate (WTI) crude dropped 0.2% to $78.70.
Analysts suggest that the latest round of sanctions could reduce global supplies of Russian oil by between 700,000 and 800,000 barrels per day. ING said: “A large portion of Russia’s shadow tanker fleet has been sanctioned, making it more difficult for Russia and buyers to circumvent the G-7 price cap.
“These sanctions have the potential to take as much as 700,000 barrels per day of supply off the market, which would erase the surplus that we are expecting for this year.”
The impact of Russian sanctions, combined with seasonal winter demand, is driving momentum in oil prices, with further upside potential. Charu Chanana, chief investment strategist for Saxo Markets in Singapore, said: “Russian sanctions and winter demand are fuelling momentum in oil prices and there could be further runway here,” pointing to expectations that president-elect Trump could tighten sanctions against Iran.
“We expect WTI to potentially reach $85 in the near term, even as rising non-OPEC+ production and slowing demand from China could limit upside from there.”
In broader market movements, the FTSE 100 (^FTSE) was muted this Tuesday morning, trading at 8,219.05 points. For more details check our live coverage here.
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