Sterling’s rise against the dollar appeared to be losing momentum as the pound fell again against the dollar in early trading on Monday.
At the time of writing, the pound was trading 0.1% lower against the dollar at $1.3107.
Traders increasingly expect the Bank of England’s pace of monetary easing to accelerate, making the pound, the best-performing G10 currency in 2024, less attractive.
This change in sentiment follows recent comments from Bank of England Governor Andrew Bailey, who suggested the bank may pursue a “more aggressive” and “proactive” approach to rate cuts. . These comments shocked the market, resulting in the pound’s biggest weekly decline since February 2023.
Nick Andrews, senior currency strategist at HSBC, said Mr Bailey’s comments were “deliberate” and “meaningful”, suggesting they could signal a pivotal moment for the currency.
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Investors have favored the pound in recent months, buoyed by expectations that the Bank of England will cut interest rates more slowly than other central banks, keeping the pound’s relatively high yields. The pound rose to $1.3434, its highest level since February 2022, after the US Federal Reserve slashed interest rates last month.
However, current market indicators suggest a reversal may be underway. Options contracts revealed that traders were paying premiums to hedge against the pound’s decline as sentiment indicators such as risk reversals sank to two-month lows.
However, the pound managed to rebound against the euro (GBPEUR=X) in early trade, rising 0.1% to 1.1953 euros.
Gold prices fell on Monday as traders adjusted bets on a modest US interest rate cut in November after a better-than-expected jobs report while awaiting further insight on inflation and comments from Federal Reserve officials did.
At the time of writing, spot gold was down 0.4% at $2,647.03 an ounce and U.S. gold futures were down 0.1% at $2,664.40. A strong September jobs report released on Friday dampened hopes for a big Fed rate cut next month, the dollar strengthened and traders now put a 95% chance of a modest 0.5 percentage point cut. It is said that
“Geopolitical tensions in the Middle East could lead to higher flows into safe-haven gold, mitigating potential declines due to a less dovish market outlook,” said Yep Jun Long, market strategist at IG. There is a possibility that it will happen.” Gold typically attracts investors during times of low interest rates and high political and economic uncertainty.
the story continues
Oil prices continue to rise as traders await Israel’s response to last week’s Iranian missile attack, amid continued concerns about war across the region.
In early European trade, Brent crude oil futures rose 0.2% to $78.19 a barrel, while US West Texas Intermediate (CL=F) crude rose 0.7% to $74.00 a barrel. The price was 93 dollars.
Some analysts believe OPEC+ spare capacity and U.S. production can offset the immediate supply shock. However, broader regional conflicts in the Middle East could lead to long-term disruptions in oil markets.
Analysts at Kasikorn Securities said Iran could close the Strait of Hormuz if the situation in the Middle East continues to escalate. This is an unprecedented move, and global oil prices could soar above $100 per barrel, but are unlikely to rise above $200 per barrel.
The Strait of Hormuz is a route that accounts for 20-30% of the world’s crude oil exports from countries such as Saudi Arabia, Iran, Iraq, Kuwait, and the United Arab Emirates.
But Beyond Securities deputy CEO Swat Sinsadok said there was only a 20-30% chance that Iran would close the Strait of Hormuz.
Iran is one of the world’s top 10 oil producing countries, with oil production exceeding 3.3 million barrels per day in August.
Read more: Oil stocks to watch as Biden signals support for Israeli retaliatory strikes against Iran
“There are no visible diplomatic signs or activities that would support an escalation of hostilities in the Middle East,” said Kelvin Wong, senior market analyst at Oanda.
He also highlighted that the strong US non-farm employment report released last Friday reinforced the idea of a soft landing for the economy and added bullish sentiment to the oil market.
“Geopolitical risk premiums and a ‘US soft landing vibe’ after a strong September NFP underpin macro factors likely to support a near-term bullish trend in WTI crude.”
Meanwhile, the FTSE 100 (^FTSE) edged higher, rising 0.3% to 8,267 points. For more information, watch the live broadcast here.
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