Pound and Euro Fluctuate as Markets Await Inflation Figures
The British pound held steady against the US dollar on Monday, trading at $1.2619, following a sharp decline on Friday that saw it drop to its lowest level in four months. The pound's slight recovery was supported by a weaker dollar, as the post-election rally in US markets appeared to lose momentum.
According to Jane Foley, senior FX strategist at Rabobank, "The pound continues to hold its own vs. the EUR." She further stated that "We retain our forecast that EUR/GBP is likely to edge to the 0.8150 level on a 12-month view."
Against the euro (GBPEUR=X), sterling was also flat, trading at €1.1968. The pound's prospects against the euro could face fresh challenges if UK inflation and upcoming PMI data disappoint market expectations.
The euro is also facing broader headwinds, with political uncertainty in Germany and concerns about the potential impact of US tariffs under the next Trump administration weighing on the single currency.
Gold Prices See Modest Uptick as Dollar's Rally Falters
Gold prices saw a modest uptick on Monday, following a sharp decline last week, as the dollar's recent rally faltered. Traders are now looking ahead to remarks from Federal Reserve officials later this week for further direction on the US interest rate outlook.
Spot gold rose marginally by 0.1% to $2,588.28 per ounce, while US gold futures edged 0.6% higher to $2,586.30 at the time of writing. The increase comes after the US dollar index (DX-Y.NYB), which surged 1.6% last week, pulled back slightly, easing pressure on gold.
A weaker dollar tends to make gold more affordable for holders of other currencies, supporting demand for the precious metal. Gold prices have struggled to break through the key $2,600 level since last week, with market participants factoring in expectations of a more cautious pace of rate cuts by the Federal Reserve.
Oil Prices Slip as Concerns about Slowing Fuel Demand and Global Surplus Limit Gains
Oil prices were slightly lower during early European trading as concerns about slowing fuel demand in China and a forecasted global oil surplus limited previous gains over the weekend as the conflict in Ukraine escalated.
Brent crude futures lost 0.2%, trading at $70.91 per barrel, while US West Texas Intermediate (WTI) (CL=F) slipped 0.3% to $66.85 per barrel at the time of writing. Crude prices rose over the weekend, following a significant escalation in the Russia-Ukraine war, with Russia launching its most extensive airstrike on Ukraine in nearly three months.
The attack caused severe damage to Ukraine's power infrastructure, intensifying geopolitical uncertainty and drawing attention to potential disruptions in global energy markets. However, these concerns were tempered by ongoing worries over China's economic slowdown. Recent data from the world's largest oil importer showed a 4.6% drop in refinery throughput in October, compared to the same month last year.
Additionally, factory output in China grew at a slower pace, further dampening expectations for a strong recovery in fuel demand. The global oil market has also been weighed down by forecasts from the International Energy Agency (IEA), which warned last week that global oil supply could exceed demand by more than 1 million barrels per day by 2025, even if OPEC+ maintains its current production cuts.
Conclusion
The pound and euro fluctuated on Monday as markets awaited inflation figures. The pound held steady against the US dollar, while sterling was flat against the euro. Gold prices saw a modest uptick as the dollar's rally faltered. Oil prices slipped due to concerns about slowing fuel demand in China and a forecasted global oil surplus.
The market is waiting for the release of UK’s latest inflation figures later this week. If inflation remains stubbornly high, it could fuel concerns about the Bank of England's tightening policy, potentially weighing on the currency. Traders are also looking ahead to remarks from Federal Reserve officials later this week for further direction on the US interest rate outlook.
The global oil market has been weighed down by forecasts from the International Energy Agency (IEA), which warned last week that global oil supply could exceed demand by more than 1 million barrels per day by 2025, even if OPEC+ maintains its current production cuts.