The pound was muted against the dollar in early European trading, hovering around $1.2566. The muted movement came amid lighter-than-usual trading volumes as market participants began winding down ahead of the New Year holiday.
Despite recent fluctuations, the pound has proven relatively resilient this year. It remains one of the better-performing major currencies against the dollar, down just 1.5% year-to-date after holding its ground for much of 2024. A key factor in the pound’s stability has been the cautious approach of the Bank of England (BoE) toward interest rate cuts. The central bank has reduced borrowing costs by only half a percentage point this year, providing ongoing support to sterling.
However, shifting market expectations for further rate cuts in the UK have weighed on the pound in recent weeks. A hawkish stance from the US Federal Reserve, coupled with the strength of the US economy, has buoyed the dollar, particularly as US Treasury yields rise.
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Traders now anticipate 51.5 basis points (bps) of rate cuts from the BoE next year, a slight increase from the 46bps expected before last week’s central bank policy meeting. The BoE held interest rates steady, but its decision revealed greater internal division than markets had anticipated.
The pound was also flat against the euro (GBPEUR=X), at €1.2060.
Gold prices remained largely unchanged on Monday as investors await further insights into the US Federal Reserve’s interest rate outlook and president-elect Donald Trump’s tariff policies — two key factors that could shape the metal’s trajectory in 2025.
The spot price of gold edged slightly lower, trading at $2,612.39 per ounce, while gold futures saw a modest decline of 0.2%, settling at $2,627.50 per ounce.
The yellow metal continues to benefit from safe-haven demand, particularly in the face of potential tariffs and trade policies under the incoming Trump administration. The prospect of escalating trade conflicts could drive risk aversion, further bolstering demand for gold as a hedge.
However, expectations of fewer rate cuts from the Federal Reserve next year could limit gold’s upside potential, given its non-yielding nature.
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Gold also finds support from geopolitical uncertainties, with the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East continuing to stoke investor anxiety. The dollar index (DX-Y.NYB), which has remained relatively flat, has helped gold maintain its sideways movement, said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.
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“Geopolitical tensions have been a major factor in gold’s uptrend this year and are still likely to be a part of the narrative in 2025, especially with Trump entering the picture,” he said.
“From a very short-term perspective, until the start of the new year, we are very likely to see this kind of lethargic sideways price movement,” Wong said.
As 2024 draws to a close, gold prices are on track to finish the year with a 27% gain, marking their strongest annual performance since 2010.
Oil prices kicked off the final week of 2024 with losses as traders awaited critical economic data from China and the US, which will offer insights into the growth prospects of the world’s two largest oil consumers.
Brent crude futures fell by 0.3%, trading at $73.98 per barrel, while US West Texas Intermediate (WTI) crude dropped 0.4%, settling at $70.34.
Despite China’s economic performance falling short of expectations this year, global oil consumption reached an all-time high in 2024, with oil stockpiles heading into the new year at relatively low levels. This points to a tightening supply outlook, according to Ryan Fitzmaurice, senior commodity strategist at Marex.
“Global oil consumption reached an all-time high in 2024 despite China underperforming expectations, and oil stockpiles are heading into next year at relatively low levels,” said Ryan Fitzmaurice, senior commodity strategist at Marex.
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“Going forward, China economic data is expected to improve as the recent stimulus measures take hold in 2025. Also, lower rates in the US and elsewhere should be supportive of oil consumption.”
Investors are closely watching two key economic indicators due this week — China’s PMI factory surveys on Tuesday and the US ISM manufacturing survey for December, which will be released on Friday. These reports will offer clues on the economic health of the two major oil-consuming nations.
In broader market movements, the FTSE 100 (^FTSE) was lower on Monday morning, trading at 8,117.82 points. For more details check our live coverage here.
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