The pound has fallen to a 14-month low in early London trading, as a bond-market sell-off fuels growing anxiety about UK assets.
Sterling extended its recent losses against the dollar, dropping to around $1.2290 at the time of writing, after briefly touching $1.226. This marks its lowest level since November 2023, underscoring the impact of rising UK borrowing costs, which continue to rattle market confidence at a time when the US dollar is generally strengthening.
CCY – Delayed Quote • USD
1.2293 – (0.00%)
As of 9:39:09 GMT. Market open.
Michael Brown, senior research strategist at brokerage Pepperstone, warned that the situation is becoming increasingly concerning for the UK economy. “Things are also getting rather ugly,” Brown told clients this morning, adding that the dynamic of rising yields alongside a weakening currency is a “classic sign of fiscal de-anchoring.”
He noted that it signals growing unease over the government’s ability to manage fiscal challenges. “We’re not at the Truss/Kwarteng stage just yet, but things are clearly on very shaky ground indeed,” he said.
Brown expressed a bearish outlook for the pound, saying his preference is to be “short GBP,” betting that the currency will continue its decline.
Read more: FTSE 100 LIVE: Stocks mixed as pound falls to 14-month low after bond sell-off
Despite these recent losses, the pound remains significantly above the historic low reached after the 2022 mini-budget, when it briefly plunged to near-parity against the dollar.
However, some analysts believe the recent turmoil in the UK bond market may be close to subsiding. Kyle Chapman, an analyst at Ballinger Group, suggested that the dramatic moves are driven by ongoing concerns about UK borrowing levels but doubted that such a swift market reaction is justified. “I think that we are going to see some recovery quite quickly once the market calms,” Chapman said.
The pound was also lower against the euro (GBPEUR=X), trading at €1.1920.
CCY – Delayed Quote • USD
1.1920 – (-0.48%)
As of 9:39:16 GMT. Market open.
Gold prices held steady near a four-week peak on Thursday, as investors shifted focus to Friday’s US jobs report for insights into the Federal Reserve’s interest rate strategy for 2025.
The spot price rose 0.4% to $2,663.43 per ounce, while gold futures edged 0.4% higher to $2,682.10 per ounce.
At the Federal Reserve’s December meeting, officials opted for a 25-basis point rate cut, but “some participants said there was merit in keeping rates unchanged at that meeting, citing the higher risk of persistently elevated inflation.”
The precious metal had reached a near four-week high in the previous session, buoyed by a weaker-than-expected US private employment report, which hinted that the Fed might be less aggressive in easing rates this year.
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“Prices are trading in a narrow range… A new trigger is needed for gold to breach its resistance,” said Ajay Kedia, director at Kedia Commodities in Mumbai, Reuters reported.
The market now looks to Friday’s jobs report for further clues about the Fed’s policy direction. Gold is often seen as a hedge against inflation, but high interest rates diminish its appeal as a non-yielding asset.
“We believe the bulk of the rally has been put in and that while gold’s upward momentum may carry it higher in the near term and in early 2025, a combination of physical and financial market factors may tame the rally and drive gold moderately lower by the end of next year,” said HSBC in a note.
COMEX – Delayed Quote • USD
2,680.30 – (+0.30%)
As of 4:29:40 GMT-5. Market open.
Oil prices faced pressure on Thursday as investors reacted to data showing an unexpected increase in US product inventories, coupled with disappointing economic indicators from China.
Brent crude futures lost 0.2% to $76.05 per barrel, while US West Texas Intermediate (WTI) crude lost 0.1% to $73.24.
China’s inflation data for December revealed subdued consumer price index (CPI) readings, showing little change, while the producer price index (PPI) declined for the 27th consecutive month. This points to minimal progress in China’s ongoing disinflationary trend, despite the government’s aggressive stimulus measures, which are set to extend through late 2024.
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As the world’s biggest oil importer, China’s economic performance remains a critical concern for crude markets, with traders wary that the country’s sluggish growth could dampen oil demand.
Additionally, crude prices were weighed down by the strengthening dollar. Hawkish signals from the Federal Reserve increased speculation that the central bank will slow the pace of interest rate cuts in 2025, further contributing to the bearish sentiment in the market.
In broader market movements, the FTSE 100 (^FTSE) rose on Thursday morning, trading at 8,283.61 points. For more details check our live coverage here.
NY Mercantile – Delayed Quote • USD
75.93 – (-0.30%)
As of 4:29:42 GMT-5. Market open.
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