Sterling was lower against the dollar, slipping 0.2% to $1.3025 in early European trading, after tumbling to a near two-month low against the greenback last week, following weaker-than-expected UK inflation data.
Sterling initially showed resilience, buoyed by positive domestic jobs data. Despite a slowdown in wage growth, an unexpected drop in the UK’s unemployment rate lent support to the currency early in the week.
However, the rally was short-lived. On Wednesday, the release of softer-than-anticipated inflation figures sent the pound sharply lower. The UK’s consumer price index (CPI) for September showed headline inflation easing from 2.2% to 1.7%, below market expectations of 1.9%, and significantly under the Bank of England’s (BoE) 2% target.
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The pound regained some ground on Thursday and Friday, helped by improved investor sentiment and surprisingly strong retail sales data. UK retail sales rose by 0.3% in September, defying predictions of a 0.3% contraction.
Despite the late-week recovery, GBP/USD was unable to fully recoup its mid-week losses, closing the period lower as concerns over subdued inflation weighed on sterling’s outlook.
Against the euro (GBPEUR=X), sterling also basically muted, trading at €1.2003.
Gold prices surged to an all-time high on Monday, continuing last week’s rally as rising geopolitical tensions and uncertainty surrounding the upcoming US presidential election boosted demand for safe-haven assets.
At the time of writing, spot gold was trading at $2,727.01 per ounce, after touching a record high of $2.732 during the Asia trading session. Meanwhile, US gold futures rose 0.6% to $2,745.90.
The rally was primarily driven by heightened safe-haven demand, with investors reacting to reports over the weekend that Israel was preparing a military response to Iran following a missile strike earlier in the month. Ongoing hostilities between Israel, Hamas, and Hezbollah added to the tensions, further supporting gold prices.
Additionally, traders turned cautious ahead of the US elections in early November, with polls indicating a tightly contested race. Analysts at ANZ suggested that the election outcome remained “too close to call”, adding to the overall sense of uncertainty in the markets.
Read more: UK house prices rise but most owners are pricing to sell
Expectations of interest rate cuts also supported gold. In the US, market participants are pricing in a 92.6% likelihood of a Federal Reserve rate cut in November, according to the CME FedWatch tool. Meanwhile, the European Central Bank lowered rates by a quarter point last week.
Gold, which does not offer yields, typically benefits in a low-interest-rate environment, making it more attractive to investors. During times of political and economic uncertainty, the precious metal is widely viewed as a safe investment option.
Crude oil prices inched higher during European trading on Monday, recovering slightly after a steep 7% drop last week, which was driven by concerns over weakening demand from China, the world’s largest oil importer, and an easing of concerns about potential supply disruptions in the Middle East.
Brent crude futures climbed 0.7% to $73.58 a barrel, while US West Texas Intermediate (WTI) (CL=F) crude rose 0.6% higher to $69.69 per barrel during early European trading.
Oil prices dipped last week on slowing economic growth in China and falling risk premiums in the Middle East. US president Joe Biden said on Friday that there was an opportunity to “deal with Israel and Iran in a way that ends the conflict for a while”.
However, tensions in the Middle East intensified over the weekend, raising concerns over the crude supply chain again.
Saudi Aramco’s CEO told an energy conference in Singapore on Monday that he is still “fairly bullish” on China’s oil demand in light of stepped up policy support aimed at boosting growth, and because of rising demand for jet fuel and liquid-to-chemicals.
China on Monday morning cut benchmark lending rates as anticipated, part of a broader package of stimulus measures to revive the economy.
Meanwhile, the FTSE 100 (^FTSE) was higher at the open, rising 0.2% to at 8,376 points. For more details check our live coverage here.
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