Pound (GBPUSD=X, GBPEUR=X)

The pound has bounced back slightly against the dollar, climbing 0.3% to $1.3334, after finding itself in the red in the early hours of European trading. The greenback has made a comeback as US president Donald Trump appeared to soften his recent comments on China and the head of the US Federal Reserve.

The US Dollar Index (DX-Y.NYB), which measures the greenback against a basket of six major currencies, is up amid optimism over de-escalation in the US-China trade war and diminishing fears of Trump firing Fed chair Jerome Powell for not lowering interest rates.

Read more: FTSE 100 LIVE: Markets gain as Trump says China tariff will be cut 'substantially' from 145%

Speaking in the Oval Office, Trump said he had "no intention of firing" Powell after repeatedly criticising the head of the central bank, but he added that he would like Powell to be "a little more active" on cutting interest rates.

On China, Trump said “discussions with Beijing are going well” and that he thinks “they will reach a deal”. Trump added that tariffs on China would not be as high as “145%, but they wouldn’t be zero”.

“Whatever other assumptions we make, it’s hard to avoid the conclusion that imposing draconian import tariffs on goods which have no easy domestic substitutes in the US, a country with little spare capacity anyway, will be inflationary (and ultimately, bad for growth),” said Kit Juckes, chief FX strategist, at Société Générale.

Elsewhere in currency markets, the pound lost 0.3% against the euro, trading at €1.1660.

Gold (GC=F)

Gold, which surged through $3,500 an ounce for the first time yesterday, is down as demand for the safe-haven asset receded.

Gold futures were down 2% to $3,348.90 per ounce at the time of writing, while the spot price had retreated 3.61% from its new record to trade at $3,329.73 an ounce.

Gold prices had been rising due to a weaker US dollar, growing fears of a global recession, and ongoing trade tension between the United States and China. However, the sentiment changed after a more positive message from the US president.

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Despite the retreat, JP Morgan sees gold prices crossing the $4,000 per ounce milestone next year, as a result of the higher risk of recession amid US tariffs and the ongoing US-China trade war, the bank said in a note on Tuesday.

According to the World Gold Council, global central banks added 1,045 metric tons of gold to their reserves in 2024, with the largest share of purchases occurring towards the end of the year.