The pound remained subdued against the US dollar in early European trading, holding around $1.2528 as markets grappled with thin liquidity following the Christmas holiday and a stronger greenback.
The dollar’s strength was bolstered by growing expectations that the US Federal Reserve may adopt a more cautious approach to rate cuts in the coming months.
The US Dollar Index (DX-Y.NYB), which tracks the greenback against six major currencies, traded above 108, just shy of its highest point since November 2022.
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Meanwhile, the pound continued to face pressure from concerns over the Bank of England’s (BoE) monetary policy stance.
Expectations are building that the central bank could adopt a dovish approach in 2024, after a split decision in December where three policymakers voted in favour of rate cuts. The BoE held its key interest rate at 4.75%, but the split vote raised speculation that rate cuts could accelerate in 2025.
In contrast, the pound showed some resilience against the euro (GBPEUR=X), edging up by 0.1% to €1.2023.
Gold prices saw a modest decline on Friday amid thin year-end trading, though they remained poised to post gains for the week as markets awaited economic signals under the incoming Trump administration.
The spot price of gold slipped by nearly 0.1% to $2,627.85 per ounce, while gold futures lost 0.3%, trading at $2,644 per ounce.
Year-end trading in gold typically sees lower volumes, as many institutional investors close their books for the holiday season, leading to subdued price movements.
Despite the slight pullback, gold is on track to close the year with a solid 27% gain, marking its best annual performance since 2010. This surge has been driven by robust central bank purchases, heightened geopolitical uncertainties, and accommodative monetary policies from major central banks.
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Looking ahead, analysts expect the upward trend to continue. “Gold will still be purchased by central banks, and as inflation continues, you may see increased demand for gold on the retail side as well,” said Daniel Pavilonis, senior market strategist at RJO Futures, forecasting prices could exceed $3,000 per ounce in the coming year.
Oil prices edged higher on Friday, set for a modest weekly gain, supported by expectations that China’s economic recovery will be bolstered by ongoing stimulus measures. However, the dollar’s strength capped further gains.
