Pound (GBPUSD=X)

The pound was muted against the dollar in early European trading, hovering around $1.2566. The muted movement came amid lighter-than-usual trading volumes as market participants began winding down ahead of the New Year holiday.

Despite recent fluctuations, the pound has proven relatively resilient this year. It remains one of the better-performing major currencies against the dollar, down just 1.5% year-to-date after holding its ground for much of 2024. A key factor in the pound's stability has been the cautious approach of the Bank of England (BoE) toward interest rate cuts. The central bank has reduced borrowing costs by only half a percentage point this year, providing ongoing support to sterling.

However, shifting market expectations for further rate cuts in the UK have weighed on the pound in recent weeks. A hawkish stance from the US Federal Reserve, coupled with the strength of the US economy, has buoyed the dollar, particularly as US Treasury yields rise.

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Traders now anticipate 51.5 basis points (bps) of rate cuts from the BoE next year, a slight increase from the 46bps expected before last week's central bank policy meeting. The BoE held interest rates steady, but its decision revealed greater internal division than markets had anticipated.

The pound was also flat against the euro (GBPEUR=X), at €1.2060.

Gold (GC=F)

Gold prices remained largely unchanged on Monday as investors await further insights into the US Federal Reserve’s interest rate outlook and president-elect Donald Trump’s tariff policies — two key factors that could shape the metal’s trajectory in 2025.

The spot price of gold edged slightly lower, trading at $2,612.39 per ounce, while gold futures saw a modest decline of 0.2%, settling at $2,627.50 per ounce.

The yellow metal continues to benefit from safe-haven demand, particularly in the face of potential tariffs and trade policies under the incoming Trump administration. The prospect of escalating trade conflicts could drive risk aversion, further bolstering demand for gold as a hedge.

However, expectations of fewer rate cuts from the Federal Reserve next year could limit gold’s upside potential, given its non-yielding nature.

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Gold also finds support from geopolitical uncertainties, with the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East continuing to stoke investor anxiety. The dollar index (DX-Y.NYB), which has remained relatively flat, has helped gold maintain its sideways movement, said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.