The British pound saw a modest recovery against the dollar in early European trading on Monday, rising 0.4% to $1.2465. This followed a sharp decline late last week that pushed sterling to its lowest level since April 2024, triggered by data revealing an 11-month low in factory output.
Adding to the pressure, recent data indicated a significant drop in UK business confidence following the autumn budget. The British Chambers of Commerce (BCC) reported that over half of surveyed companies intend to increase prices by early April, citing rising costs and taxes as primary concerns. Shevaun Haviland, director-general of the BCC, highlighted the budget’s negative impact on business sentiment amidst escalating expenses.
The dollar’s strength, fueled by anticipation of Donald Trump’s return to the White House and his potential pro-growth policies, has also contributed to the pound’s weakness. Meanwhile, the pound edged slightly higher against the euro, gaining around 0.1% to reach €1.2062.
Gold and Oil Prices Dip Amid Dollar Strength
The rising dollar exerted downward pressure on gold prices, with spot gold dipping 0.2% to $2,634.93 per ounce and gold futures declining 0.5% to $2.641.50 per ounce. While gold initially benefited from safe-haven demand in anticipation of Trump’s presidency, the dollar’s appreciation countered this trend. As gold is typically traded in dollars, a stronger greenback makes it more expensive for holders of other currencies, dampening demand.
Oil prices also retreated on Monday, mirroring gold’s trajectory. Brent crude futures fell 0.4% to $76.21 per barrel, while US West Texas Intermediate (WTI) crude slipped 0.3% to $73.75. The stronger dollar made dollar-denominated oil more costly for international buyers, contributing to the price decline.
Despite a recent surge driven by cold weather and expectations of increased heating oil demand, as well as hopes for Chinese economic stimulus, the dollar’s strength ultimately tempered oil’s upward momentum. Market uncertainty persists, fueled by potential US trade tariffs and their potential impact on global growth.
Broader Market Trends and Conclusion
The FTSE 100 experienced a decline on Friday morning, reaching 8,206.89 points. The interplay between the resurgent pound, the robust dollar, and fluctuating commodity prices underscores the complex dynamics currently shaping the UK and global financial markets. Investors are closely monitoring these factors, along with political and economic developments, as they navigate the evolving investment landscape. The coming weeks will be crucial in determining the direction of these key markets.
