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The pound strengthened against the dollar, rising 0.2% to $1.2967, as fears that president Donald Trump’s tariffs could spur inflation and slow economic growth put pressure on the greenback.
The dollar index (DX-Y.NYB), which tracks the US currency against a basket of other major currencies, has fallen roughly 3.5% this month. Currently, the index stands at 103.86, down 0.2%. Anxiety over impending tariffs on America’s trading partners has contributed to the dollar’s weakness.
Donald Trump said he would issue tariffs on “all countries” and threatened to impose levies on Russian oil.
Trump has promised a “Liberation Day” on Wednesday, when he is set to unveil reciprocal levies to address trade practices that his government deems unfair. Tariffs on car imports to the US are due to come into force on Thursday.
“You’d start with all countries, so let’s see what happens,” Trump told reporters onboard Air Force One, dashing hopes he might scale back some of the threatened levies.
Analysts are concerned that these aggressive trade measures could stifle US economic growth and limit the Federal Reserve’s ability to cut interest rates, while simultaneously driving inflation higher in the short term. This combination of factors is expected to weigh on the dollar and could push the GBP/USD exchange rate higher in the near term.
"Recession risks have become elevated – to a 40% probability – on concerns that aggressive US policies hit business and household sentiment," warned Bruce Kasman, chief economist at JP Morgan.
Gold prices surged to a new all-time high today, driven by growing concerns over Trump’s threat to impose reciprocal tariffs on all countries that have prompted a flight into safe-haven assets.
Spot gold rose 1.2% to $3,122.65 per ounce, while gold futures climbed 1.3% to $3,153.10.
KCM Trade chief market analyst Tim Waterer said: “Markets’ anxiety levels have been ramping up ahead of the reciprocal US tariff announcements, which is keeping gold in high demand as a defensive play.
“If the tariff announcements this week are not as severe as feared, then the gold price could start to backtrack as profit-taking from the highs may be triggered.”
Gold, traditionally viewed as a safe-haven asset, has posted gains for four consecutive weeks amid rising concerns about the global economic outlook. The precious metal has increased in value by about 18% this year, hitting at least 16 record highs.
The rally has led several major banks to revise their price forecasts for gold. Goldman Sachs, Bank of America, and UBS have all raised their price targets for the yellow metal this month.
Goldman now expects gold to hit $3,300 per ounce by year-end, up from a previous forecast of $3,100. Bank of America anticipates gold will trade at $3,063 per ounce in 2025 and $3,350 per ounce in 2026, marking a significant increase from its earlier projections of $2,750 and $2,625, respectively.
"For now, gold's appeal as a safe haven and inflation hedge has further strengthened in light of these geopolitical concerns and tariff uncertainty. We remain constructive on the outlook of gold amid ongoing global trade friction and uncertainty," said analysts at OCBC.
Oil prices eased on Monday, heading for a modest quarterly loss despite a warning from Trump that he may impose secondary tariffs on buyers of Russian oil if Moscow obstructs his efforts to end the war in Ukraine.
Brent crude lost 0.3% to trade at $72.57 per barrel, while West Texas Intermediate (WTI) slipped 0.2% to $69.25 per barrel.
The decline came after three consecutive weeks of gains, primarily driven by expectations of tighter supplies following Trump's threat of additional sanctions on Russia.
Trump also issued a warning to Iran, threatening bombing if the country failed to agree to a new nuclear deal with Washington.
Both oil benchmarks were on track to end the month slightly lower, marking their first quarterly drop in two quarters.
"[Trump's] threat of secondary tariffs on Russia and Iranian oil is a factor oil market participants are tracking, although he has indicated he is not planning to introduce them for now," said UBS analyst Giovanni Staunovo. "But, there is a rising risk of larger supply risks down the road."
Losses were capped as Chinese media reports showed the discovery of major reserves in the South China Sea, which offset concerns over tighter supplies and slowing economic growth.
Chinese state media reported on Monday that CNOOC (600938.SS) had discovered an oilfield in the South China Sea with proven reserves exceeding 100 million tonnes. The field, located off the coast of Shenzhen in China’s Exclusive Economic Zone, is not in a disputed region of the sea and lies at an average depth of 100 meters.
The oilfield could help strengthen China’s oil reserves and reduce its dependence on imports. However, media reports did not specify when CNOOC would begin large-scale extraction, as offshore reserves are typically difficult to explore.
In broader market movements, the FTSE 100 (^FTSE) was lower at the time of writing, losing 0.9% to 8,5852 points. For more details, check our live coverage here.