Pound (GBPUSD=X)

The pound has fallen to a 14-month low in early London trading, as a bond-market sell-off fuels growing anxiety about UK assets.

Sterling extended its recent losses against the dollar, dropping to around $1.2290 at the time of writing, after briefly touching $1.226. This marks its lowest level since November 2023, underscoring the impact of rising UK borrowing costs, which continue to rattle market confidence at a time when the US dollar is generally strengthening.

Michael Brown, senior research strategist at brokerage Pepperstone, warned that the situation is becoming increasingly concerning for the UK economy. "Things are also getting rather ugly," Brown told clients this morning, adding that the dynamic of rising yields alongside a weakening currency is a "classic sign of fiscal de-anchoring."

He noted that it signals growing unease over the government's ability to manage fiscal challenges. "We're not at the Truss/Kwarteng stage just yet, but things are clearly on very shaky ground indeed," he said.

Brown expressed a bearish outlook for the pound, saying his preference is to be "short GBP," betting that the currency will continue its decline.

Read more: FTSE 100 LIVE: Stocks mixed as pound falls to 14-month low after bond sell-off

Despite these recent losses, the pound remains significantly above the historic low reached after the 2022 mini-budget, when it briefly plunged to near-parity against the dollar.

However, some analysts believe the recent turmoil in the UK bond market may be close to subsiding. Kyle Chapman, an analyst at Ballinger Group, suggested that the dramatic moves are driven by ongoing concerns about UK borrowing levels but doubted that such a swift market reaction is justified. "I think that we are going to see some recovery quite quickly once the market calms," Chapman said.

The pound was also lower against the euro (GBPEUR=X), trading at €1.1920.

Gold (GC=F)

Gold prices held steady near a four-week peak on Thursday, as investors shifted focus to Friday's US jobs report for insights into the Federal Reserve's interest rate strategy for 2025.

The spot price rose 0.4% to $2,663.43 per ounce, while gold futures edged 0.4% higher to $2,682.10 per ounce.

At the Federal Reserve's December meeting, officials opted for a 25-basis point rate cut, but "some participants said there was merit in keeping rates unchanged at that meeting, citing the higher risk of persistently elevated inflation."

The precious metal had reached a near four-week high in the previous session, buoyed by a weaker-than-expected US private employment report, which hinted that the Fed might be less aggressive in easing rates this year.