The pound hovered near a three-month low against the dollar in early European trading on Wednesday, with GBP/USD edging around $1.2750 as markets awaited crucial US inflation data set to be released later in the day.
Investors are closely watching for any signals that the figures that could sway the Federal Reserve’s stance on interest rates, though few expect the data to alter the Fed’s December policy decision unless it diverges sharply from expectations.
Economists anticipate that headline US inflation will have picked up to 2.6% year-on-year for October , up from 2.4% in September. Core CPI, a key metric that strips out volatile food and energy prices, is projected to rise by 3.3% year-on-year, a steady increase that aligns with recent trends. On a monthly basis, analysts predict a 0.2% increase in headline inflation and a 0.3% rise in the core figure.
This expected inflation uptick is seen as unlikely to shake the Fed’s confidence in the current disinflationary trajectory, as evidenced by recent statements from Fed officials. With many policymakers expressing satisfaction with progress toward the Fed’s 2% target, the latest CPI data is not expected to prompt a significant shift in outlook unless it diverges notably from the forecast.
Read more: FTSE 100 LIVE: Stocks lacklustre as traders await US inflation data
The US Dollar Index ( DX-Y.NYB ), a benchmark tracking the dollar’s strength against a basket of six major currencies, remained strong at 106.08, holding onto recent gains and marking its highest level in over six months.
Against the euro ( GBPEUR=X ), sterling was slightly higher, up 0.1% to €1.2009. Germany's domestic political landscape, shaped by upcoming elections set for February, continues to weigh on the euro.
Political uncertainty is casting a shadow over Europe’s largest economy as it struggles to stabilise after a year marked by economic headwinds and weak growth. Additionally, concerns around potential US trade tariffs further complicate the outlook for the eurozone.
Gold prices ticked up on Wednesday, rebounding slightly after recent losses as a pause in the dollar’s rally provided a breather for the metal.
Spot gold climbed 0.1% to $2,611.08 per ounce, while US gold futures rose by the same margin to $2,607.80, maintaining a foothold above the $2,600 level after nearing a seven-week low on Tuesday.
The yellow metal has been under pressure in recent weeks, retreating sharply from record highs following a broad risk-on rally in global markets spurred by Donald Trump’s election victory . The outcome drove a surge in investor confidence, which weighed on traditional safe havens like gold, pushing spot prices to a near two-month low.
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However, uncertainty remains over Trump’s proposed trade tariffs , with potential repercussions for global economic stability dampening risk appetite. This concern, coupled with restrained fiscal stimulus from China, has lent some support to gold, as investors seek refuge in the precious metal amid broader market uncertainties. The pause in the dollar’s advance ahead of key US inflation data has also given gold room to recover, breaking a three-day losing streak for now.
Analysts suggest that upcoming US inflation figures could be pivotal for gold’s direction, as they may influence the Federal Reserve’s rate outlook and, consequently, the dollar’s trajectory.
Oil prices nudged higher during early European trading as supply constraints lent short-term support despite a muted demand outlook.
Brent crude futures gained 0.1%, trading at $72 per barrel, while US West Texas Intermediate (WTI) ( CL=F ) climbed 0.1% to $68.17 per barrel at the time of writing.
“Crude oil prices edged higher as tightness in the physical market offset bearish sentiment on demand,” noted ANZ analysts in a recent report.
“Buyers in the physical market have been particularly active, with any available cargoes being snapped up quickly,” they added, highlighting near-term tightness despite a broader sense of caution in the markets.
However, longer-term demand concerns, notably from China, continue to weigh on sentiment. “We may expect prices to consolidate around current levels for longer,” said Yeap Jun Rong, market strategist at IG, explaining that recent attempts at a price rebound were quickly met with selling pressure.
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He pointed to China’s restrained fiscal stimulus measures, which have cast a shadow over demand, along with prospects of increased US oil output under a Trump presidency and potential production hikes from OPEC+.
On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) released its monthly oil market report, revising its global demand growth forecast for 2024. The report projects a 1.82 million barrel-per-day (bpd) increase in world oil demand, a slight downgrade from last month’s 1.93 million bpd forecast, with the revision largely attributed to economic weakness in China, the world’s largest oil importer.
Meanwhile, the FTSE 100 ( ^FTSE ) was higher at the open, climbing 0.2% to 8,039 points. For more details check our live coverage here .
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