commodity and currency check, 17 December

commodity and currency check, 17 December

The pound strengthened against the US dollar on Tuesday, rising 0.1% to $1.2691, following the release of robust UK labour market data for the three months ending in October.

According to the Office for National Statistics (ONS), regular pay, excluding bonuses, increased by 5.2% in October, up from 4.9% in the previous month, surpassing analysts’ expectations of a 5% rise.

The data is significant as the Bank of England (BoE) closely monitors wage growth when determining interest rate decisions, given its direct influence on inflationary pressures, particularly in the UK’s service sector. The BoE has cited wage growth as a key factor in the persistently high inflation environment.

Read more: FTSE 100 LIVE: Stocks slip as UK job vacancies fall after tax-raising budget but pay growth picks up

KPMG UK’s chief economist Yael Selfin said that today’s data makes it unlikely that the BoE will move towards an interest rate cut at its upcoming meeting on Thursday, with wage growth remaining strong.

Meanwhile, sterling was also higher against the euro (GBPEUR=X), trading at €1.2103.

Gold prices fell in early European trading on Tuesday, as investors remained cautious ahead of a series of key central bank meetings this week, with the US Federal Reserve’s meeting drawing particular attention.

Spot gold declined 0.6%, trading at $2,642.72 per ounce, while US gold futures slipped 0.5% to $2,658.30.

The Fed is widely anticipated to cut interest rates by 25 basis points following its two-day meeting, which concludes on Wednesday. This move is largely priced into the markets, but the Fed’s outlook on future rate cuts will be closely scrutinised.

Markets are increasingly focused on signals that the Fed may adopt a slower pace of rate cuts in 2024, given persistent inflation and strength in the US labour market, which suggest that the central bank may have more room to proceed cautiously.

Rhona O’Connell, analyst at StoneX, said: “The economic and political background is generally supportive for gold, but the Fed may cap prices if it signals an extended pause in rate cuts after December.”

Citi forecasts strong demand for gold and silver until US interest rates stabilise, with both metals expected to peak between late 2025 and early 2026.

Gold has surged approximately 29% this year, positioning it for its largest annual gain since 2010.

Read more: UK pay growth surge reduces chances of interest rate cut

In addition to the US Federal Reserve, the Bank of Japan and Bank of England are also scheduled to make key rate decisions this week.

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