The British pound saw a 0.3% increase against the US dollar in early European trading on Monday, reaching $1.2202, as the dollar weakened in anticipation of Donald Trump’s inauguration. Market attention was firmly fixed on the US political landscape, with Trump’s anticipated “day one” policy pronouncements expected to heavily influence market sentiment and the dollar’s trajectory.
Table Content:
Inauguration Day Uncertainty
Deutsche Bank research analyst Galina Pozdnyakova highlighted the significance of Trump’s inauguration. Traders eagerly awaited initial policy announcements on tariffs, taxes, and immigration, with tariffs being the primary focus for foreign exchange traders. Philip Shaw, an analyst at Investec, noted the market’s preoccupation with the uncertainty surrounding Trump’s policies, particularly regarding potential tariff increases. While there was a sense of relief, the focus quickly shifted to the implications of the new administration.
Despite the pound’s gains against the dollar, it experienced a 0.2% decline against the euro, settling at €1.1825.
Gold Holds Steady Amidst Anticipation
Gold prices remained relatively stable as traders prepared for potential volatility stemming from Trump’s second term. Market expectations suggested that Trump’s policy announcements would significantly impact market dynamics. Spot gold prices saw a slight increase of 0.1%, reaching $2,706.72 per ounce, while gold futures remained largely unchanged at $2,749.00 per ounce.
Gold, traditionally considered a safe-haven asset, maintained its position near a one-month high, buoyed by subdued US inflation data that fueled expectations of further interest rate cuts by the Federal Reserve. The prevailing market sentiment was influenced by the interplay between potential US policy changes and the Fed’s monetary policy. Analysts indicated that a strong start to Trump’s second term could bolster the dollar, whereas a more gradual approach might weaken it, potentially impacting gold prices. David Meger, director of metals trading at High Ridge Futures, emphasized the uncertainty surrounding Trump’s policies as a supportive factor for gold.
Oil Dips on Potential Russia Sanctions Relief
Oil prices experienced a decline as expectations of Trump easing restrictions on Russia’s energy sector, in exchange for a resolution to the Ukraine conflict, counterbalanced concerns about supply disruptions resulting from stricter sanctions. Brent crude futures decreased by 0.3% to $80.55 per barrel, while US West Texas Intermediate (WTI) crude saw a similar decline to $77.67.
ING analysts highlighted the market uncertainty surrounding Trump’s inauguration and his planned executive orders. They suggested that this uncertainty, coupled with a US holiday, might have led some market participants to reduce risk exposure. Trump was expected to announce a series of policy decisions, including lifting the moratorium on US liquefied natural gas export licenses, as part of a broader economic strengthening strategy. Meanwhile, the FTSE 100 index showed a positive trend, rising 0.2% to 8,520.86 points.
Conclusion: Market Volatility Expected Under Trump’s Second Term
Trump’s inauguration brought significant uncertainty and volatility to the markets. The pound strengthened against the dollar but weakened against the euro. Gold held steady as a safe haven, while oil prices dipped on speculation of easing sanctions against Russia. The coming days and weeks will reveal the full extent of Trump’s policy impact on global markets.
