The British pound remained stable against the dollar, trading near its highest point since the week of the US election at $1.2933. This resilience comes amidst hopes for a ceasefire in Ukraine, although President Trump’s tariff policies continue to temper investor enthusiasm.
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The US dollar index, which measures the greenback’s performance against a basket of six major currencies, saw a slight recovery. This followed President Trump’s initial threat to double tariffs on Canadian steel and aluminum imports, a decision later rescinded after Canada agreed to remove a surcharge on US-bound electricity exports. The index was up 0.2% to 106.50 at the time of writing.
However, escalating global trade tensions persist as the EU announced retaliatory tariffs on €26 billion (£22 billion) worth of US goods, a direct response to President Trump’s steel and aluminum tariffs.
Market Volatility and Geopolitical Uncertainty
Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented on the market’s reaction to the evolving trade landscape: “As the ‘Trump bump’ has turned into a slump, investors are bracing for fresh volatility ahead. The impact of tariffs is front of mind…with the risk of tit-for-tat retaliation high.” She further noted China’s retaliatory tariffs and the EU’s planned countermeasures.
News of a potential 30-day ceasefire between Ukraine and Russia, proposed by the US and accepted by Ukraine, provided further support for the pound. This development follows extended talks between Ukrainian and US officials.
Meanwhile, the pound weakened slightly against the euro, trading at €1.1848.
Gold Prices Rise Amidst Trade Concerns
Gold prices saw an uptick, driven by increased demand for the safe-haven asset amid escalating trade tensions. Investors are also anticipating the latest US inflation data, which could significantly impact gold’s trajectory.
Spot gold rose 0.4% to $2,921.16 per ounce, while gold futures saw a 0.1% increase to $2,924.00. Chris Beauchamp, chief market analyst at IG, observed that spot gold remains range-bound, with gains capped below $2,930.00 and support found at $2,880.00. He noted that while Tuesday’s bounce tested the upper limit of this range, a sustained breakout higher has yet to materialize.
Conclusion: Pound’s Resilience Tested by Global Uncertainties
The pound demonstrated resilience against the dollar, buoyed by ceasefire hopes in Ukraine. However, the ongoing global trade war initiated by the US and retaliatory measures from the EU and China continue to pose a significant threat to market stability. Gold, as a traditional safe haven, benefited from the increased risk aversion. The upcoming US inflation data will likely play a crucial role in shaping future market movements, impacting both currency and commodity markets.
