Sterling was trading flat against the dollar in early European trading, after recovering some ground as investors welcomed the latest UK GDP figures at the end of last week.
The pound also benefited from a weaker dollar as the greenback closed last week’s session on a sour note, following an unexpected deterioration in the University of Michigan’s latest US consumer sentiment index.
Dollar demand was also hit by US producer price index figures, which beat forecasts but still reported producer price growth continued to cool last month.
“It seems to me that the spike in US yields has just about run its course, and what we will continue to see, is a bumpy rather than trending FX market,” Kit Juckes, head of FX analysis at Société Générale, wrote.
Read more: What UK wealth managers and investment platforms want to see in the budget
“Next month’s labour report is going to be messed up by hurricanes, which would argue for cutting 25bp rather than pausing, in my opinion.”
On a more positive note, sterling managed to gain some ground against the euro (GBPEUR=X), rising 0.1% to €1.1956 at the time of writing.
Gold prices edged higher in early European trading on Monday as investors looked for clues about the Federal Reserve’s future interest rate cuts.
At the time of writing, spot gold was trading at $2,641.53 per ounce, up 0.1%, while US gold futures increased by 0.2% to $2,681.90.
Despite remaining near recent highs, gold’s upward momentum has been tempered by expectations of a more cautious pace of interest rate cuts by the Fed. This week’s focus turns to key addresses from several Fed officials, including Minneapolis Fed president Neel Kashkari and governor Christopher Waller, who are scheduled to speak later on Monday.
Market analysts anticipate a modest 25 basis point rate cut in November, especially following recent inflation and labor market data that exceeded expectations. Lower interest rates are generally viewed as a boon for gold, as they diminish the opportunity cost associated with holding non-yielding assets.
Read more: Traders ramp up bets on Bank of England interest rate cut amid GDP growth
Additionally, gold’s appeal as a safe haven has been reinforced by rising tensions in the Middle East, with concerns that any Israeli attacks on Iranian oil infrastructure could escalate the conflict further.
Current market sentiments indicate an 86.8% probability that the Fed will implement a 25 basis point cut in its upcoming meeting, with a 13.2% likelihood of keeping rates unchanged.
Oil prices fell sharply on Monday, reacting to disappointing economic data from China, the world’s largest crude importer, which revealed a persistent deflationary trend. The country’s plans for fiscal stimulus also failed to meet market expectations, further weighing on prices.
Brent crude futures lost 1.2% to $78.02 a barrel, while US West Texas Intermediate (CL=F) crude retreated 1.65% to $74.31 per barrel during early European trading.
Crude markets were additionally affected by ongoing discussions about a potential ceasefire in the Middle East. Rising tensions in the region had previously propelled oil prices upward for two consecutive weeks, but speculation of a de-escalation has shifted sentiment.
Traders are looking ahead to a monthly report from the Organization of Petroleum Exporting Countries (OPEC), scheduled for later on Monday. This report is anticipated to provide further insights into global supply dynamics.
Meanwhile, the FTSE 100 (^FTSE) was muted at the open, trading just under the flatline at 8,250 points. For more details check our live coverage here.
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