Pound, gold and oil prices in focus: commodity and currency check

Pedro Goncalves

Sterling hit $1.34 for the first time since 2022 against a weakened dollar as Chinese monetary stimulus coursed through commodity markets and gave several currencies a lift.

"The jury is out on whether this China stimulus story is an enduring one for global currencies. However, evidence of a US slowdown continues to accrue and investors do seem to have shifted to a sell-dollar mindset," ING analysts said.

The pound has been rallying against the dollar in the past few days, amid growing expectations that the Bank of England (BoE) will run a slower rate-cutting cycle than the US Federal Reserve. During the Asia session, the sterling advanced to its highest level since March 2022, hitting $.13430 before coming back down to $1.3389 at the time of writing.

According to the CME Group's FedWatch Tool, the markets are pricing in over a 75% chance that the Federal Reserve will cut interest rates by another 50 basis points in November.

Andrew Bailey said this week that the UK will cut interest rates “gradually” and warned consumers not to expect them to return to “near zero” levels.

Read more: FTSE 100 LIVE: European stocks lower as Chinese monetary stimulus optimism wears off

Against the euro, the pound (GBPEUR=X) was lower but traders are ramping up bets that the currency will outperform its European counterpart and other major currencies as the UK economy is expected to come out stronger from the inflation crisis.

Ray Attrill, head of FX strategy at National Australia Bank, said: “With the Bank of England lagging the developed market central bank easing cycle and the incoming UK data for the most part holding up quite well, at least on a relative basis, expressing a bearish dollar or euro view via sterling makes sense.”

The rally in gold prices pushed to a record high after jumping more than 1% in the previous session, as weak US data bolstered the case for deeper rate cuts.

Gold futures rose 0.2% to $2,681 at the time of writing, while spot gold rose 0.3% to above $2,665 an ounce. Gold has surged almost 30% this year.

"For the moment the buyers remain in control, with no sign of a reversal of any significance yet in sight. A weaker US dollar continues to drive the price on a macro level, while technically trendline support from early September remains in place," Chris Beauchamp, chief market analyst at IG, said.

"While this remains untested, upward pressure will likely continue."

Read more: UK stocks that have outperformed the FTSE All-Share index

Traders are moving into gold amid expectations that the Fed will cut interest rates further, as lower rates tend to benefit precious metals as they don't offer interest. A weaker dollar also makes metals cheaper for many buyers.

“The main driver for silver in the last few weeks has been the gold rally — which got another boost yesterday from higher rate-cut expectations following the weak consumer confidence report,” said Zhong Liang Han, analyst at Standard Chartered, according to Bloomberg.

Oil prices fell on Wednesday after rising in the previous session as investors reassessed whether China's recent stimulus plans would effectively boost the economy and drive fuel demand growth in the world's largest crude importer.

"The lack of a more concrete fiscal approach still instils some reservations over whether the economic boost can be sustained," said Yeap Jun Rong, market strategist at IG.

Brent crude futures were down by 0.4%, hovering just above $74 a barrel, while West Texas Intermediate (CL=F) was struggling to remain above $71.

"Some early WTI crude oil weakness on Wednesday follows on from a finish off the highs on Tuesday," Beauchamp said.

"However, while the gains have slowed, a top has yet to form. This may come with a close back below $70, which would open the way to the September lows once again.

"A recovery back above $72 would put the buyers in charge once more, and suggest the price will test the 50-day SMA [simple moving average]".

Meanwhile, the FTSE 100 (^FTSE) opened in the red, down by 0.2%. For more details check our live coverage here.

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