Trump’s pronouncements at the World Economic Forum in Davos sent ripples through financial markets, impacting the pound, gold, and oil. His calls for lower interest rates and warnings on tariffs created volatility and uncertainty across various asset classes.
In early European trading on Friday, the pound strengthened against the dollar, rising 0.3% to $1.2387. This surge was attributed to the greenback’s weakening following Trump’s comments on interest rates and tariffs. During his address, Trump demanded immediate interest rate cuts in the US and globally, suggesting they should “follow us.” He also cautioned companies about facing tariffs if they choose to manufacture outside the US. “If you don’t make your product in America…you will have to pay a tariff,” he stated.
However, the pound dipped 0.2% against the euro, trading at €1.1821.
Gold prices reacted positively to Trump’s remarks, rising on Friday morning and hovering near a three-month high. Spot gold climbed 0.6% to $2,772.2 per ounce, while gold futures saw a 0.5% increase to $2,777.40 per ounce. The weaker dollar, coupled with trade uncertainties stemming from Trump’s statements, bolstered gold’s appeal as a safe-haven asset. As Ole Hansen, head of commodity strategy at Saxo, noted, demand for investment metals is driven by geopolitical uncertainty, pushing investors toward safer havens. He added that the potential for tariffs to fuel inflation and weaken the dollar further could pave the way for additional gold gains.
Oil prices, on the other hand, remained relatively flat on Friday morning after experiencing sharp declines in the previous session. Brent crude futures held steady at $78.25 per barrel, while US West Texas Intermediate (WTI) crude hovered around $74.60 per barrel. Thursday’s slide in oil prices followed Trump’s call for OPEC, led by Saudi Arabia, to lower oil costs. He asserted that reducing oil prices would lead to an immediate end to the Russia-Ukraine conflict.
Derren Nathan, head of equity research at Hargreaves Lansdown, observed that Brent crude reacted to Trump’s demands for lower prices. However, he also pointed out growing resistance within the industry to Trump’s “drill baby drill” mandate, as it could negatively impact profitability. Forecasts suggest that US oil output during Trump’s second term will see a more modest increase than previously anticipated. The continued decline in US inventories indicates tight supply, making further price drops uncertain.
The FTSE 100 remained flat on Friday morning, trading at 8,561.65 points.
In conclusion, Trump’s pronouncements at Davos injected significant volatility into financial markets. While the pound saw mixed performance against the dollar and euro, gold benefited from the uncertainty, reaching near three-month highs. Oil prices, after an initial decline, stabilized. The long-term impact of Trump’s comments on market trends remains to be seen, but his intervention underscores the ongoing influence of geopolitical factors on global finance.
