The pound strengthened against the dollar in early European trading, hovering just below $1.26, following its strongest week of the year.
The rise in the currency was fueled by a positive UK Gross Domestic Product (GDP) report and disappointing retail sales figures from the US. The dollar’s decline was further exacerbated by a broader market shift, as US markets remain closed on Monday for Presidents’ Day.
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In addition, analysts observed that increasing concerns regarding tariffs were having a diminishing effect on investor sentiment.
“It appears that each new tariff announcement is affecting the markets less and less,” analysts at Lloyds remarked. “Instead, markets seem to be more focused on Trump’s discussions about Ukraine with Russian leader Putin.”
“This has contributed to a rebound in both the euro and sterling against the dollar, reaching their highest levels in about three weeks, although there are few signs that these discussions will lead to a definitive outcome.”
In the meantime, sterling was trading even higher against the euro (GBPEUR=X) on Monday morning, at €1.20.
Gold prices also rose on Monday, supported by a weaker US dollar following disappointing retail sales data for January. Investors are looking for further details on President Trump’s reciprocal tariff plans, which could heighten the risk of a global trade war.
The spot price of gold increased by 0.6% to $2,900.91 per ounce, while gold futures gained 0.4% to $2,911.60.
The dollar index remained close to a two-month low, reflecting the effects of the weak retail sales data reported for January.
A weakened dollar generally makes gold more appealing to holders of other currencies. “Gold is being buoyed by the dollar’s decline and uncertainty regarding Trump’s approach to major trading partners in implementing his tariff policies,” stated Kelvin Wong, senior market analyst for Asia Pacific at OANDA.
Trump reiterated his tariff threats on Friday, revealing that tariffs on automobiles could be imposed as soon as April 2. This followed his orders for officials to explore reciprocal tariffs against countries levying duties on US products.
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The World Gold Council (WGC) anticipates moderate yet positive growth in gold prices by 2025.
“Potential upside could stem from stronger-than-expected demand from central banks, or from a rapid decline in financial conditions leading investors to seek safer assets,” the Gold Outlook 2025 report indicated.
