The pound held steady against the dollar in early European trading on Thursday, priced at $1.2667, as UK Prime Minister Keir Starmer prepared for a meeting with US President Donald Trump. This marked Starmer’s first visit to Washington since Trump’s inauguration in January.
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Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted the delicate balancing act Starmer faces: maintaining a strong relationship with the US as a NATO ally while also appealing to his domestic base. His commitment to increase military spending to 2.5% of GDP, with a future target of 3%, strengthens his position, but might still draw criticism. Given recent geopolitical tensions, reinforcing military partnerships will likely dominate the discussion.
Trade Talks and Tariff Threats Loom Large
While trade discussions are anticipated, substantial progress on a UK exemption from existing tariffs or a future trade deal remains unlikely, especially considering Trump’s ongoing tariff threats. On Wednesday, Trump threatened new 25% tariffs on European Union imports, including cars and other goods, prompting a promise of swift retaliation from the European Commission. These developments added to existing market uncertainty.
Sterling’s Performance Against the Euro
The pound also saw minimal movement against the euro, trading at €1.2094 on Thursday morning.
Gold Prices Dip Amid Rising Treasury Yields
Gold prices declined on Thursday morning, influenced by rising US Treasury yields and anticipation of US inflation data. Spot gold fell 1.2% to $2,881.42 per ounce, while gold futures dropped 1.2% to $2,896.30. The benchmark 10-year Treasury yield rose to 4.302%, making gold less attractive as a non-yielding asset. Investors eagerly await Friday’s release of the US personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge.
A Reuters poll suggests a 0.3% monthly increase in the PCE index, matching December’s figure. Continued inflationary pressure could lead to prolonged higher interest rates in the US, further diminishing gold’s appeal.
Oil Prices Surge on Venezuela Sanctions
Oil prices climbed on Thursday following Trump’s announcement of the revocation of Chevron’s operating license in Venezuela, renewing supply concerns. Brent crude futures rose 0.5% to $72.46 a barrel, while US West Texas Intermediate (WTI) crude gained 0.5% to $68.96.
Despite this increase, Brent crude remained below $73 a barrel, a level last observed in December. Speculation about a potential end to the war in Ukraine and the subsequent lifting of sanctions on Russian oil exports has contributed to this trend. A proposed US-Ukraine agreement on mineral wealth sharing, potentially funding Ukraine’s reconstruction, further fuels these expectations.
Broader Market Performance
The FTSE 100 experienced a minor dip of 0.1% to 8,721 points on Thursday morning.
In conclusion, market movements on Thursday were driven by a confluence of factors, including political developments, trade tensions, and anticipation of key economic data. The pound remained stable against the dollar and euro, while gold prices dipped and oil prices rose. These trends highlight the complex interplay of geopolitical and economic forces shaping the current financial landscape.
