The British pound retreated against the US dollar on Monday, following a strong rally last week driven by market reactions to policy decisions by former US President Donald Trump. This week opens with investors cautiously observing global economic indicators and potential shifts in monetary policy.
Last week witnessed a decline in the US dollar as investors expressed concern over new import tariffs imposed by the Trump administration on Canada, Mexico, and China. Further contributing to this caution was the US government’s temporary suspension of military aid to Ukraine amidst the ongoing conflict with Russia.
Trump’s remarks on Sunday night, where he refused to dismiss the possibility of a US recession in the current year, also added to market uncertainty. He attributed this potential economic downturn to a “period of transition” as his administration implemented significant policy changes aimed at “bringing wealth back to America.”
The pound’s decline on Monday saw it lose 0.2% against the dollar, settling just below the $1.29 mark. Despite this slight pullback, sterling had appreciated by approximately 2.3% against the dollar over the preceding five trading sessions. Concurrently, the US dollar index, which measures the dollar’s performance against a basket of major currencies, saw a modest 0.1% increase.
The pound also continued its decline against the euro, extending losses from the previous week. The euro’s recent strength can be attributed to positive economic data releases and a quarter-point interest rate cut by the European Central Bank. Recent inflation figures from the Eurozone indicated a slowing pace of price increases, with February’s inflation rate expected to have dropped to 2.4%. Although lower than January’s 2.5%, this figure still surpasses the European Central Bank’s 2% target.
Meanwhile, gold prices exhibited stability, hovering around the $2,920 mark as investors sought refuge in safe-haven assets. Gold futures experienced a 0.2% increase in London trading, while spot gold prices saw a marginal uptick to $2,911. Spot gold had gained nearly 2% in the previous week amidst escalating geopolitical tensions. Gold has consistently reached new highs throughout the year, reflecting its enduring appeal as a safe haven investment.
Oil prices remained relatively unchanged on Monday, recovering from a dip last week. Traders are currently awaiting further actions from OPEC+, the Trump administration, and clearer signals regarding the economic growth of major global economies. Brent crude oil prices edged slightly higher, trading above $70 per barrel, while West Texas Intermediate crude oil prices remained just below the flatline, hovering near $67 per barrel. Concerns about global economic weakness, particularly deflationary pressures in the Chinese economy, contributed to the cautious sentiment in the oil market, according to Susannah Streeter, head of money and markets at Hargreaves Lansdown.
In conclusion, the pound’s recent rally paused on Monday, giving back some gains against the dollar and euro. Gold maintained its steady performance, while oil prices remained largely unchanged. Investors continue to monitor global economic developments and policy decisions for further direction.
