Pound (GBPUSD=X)

The pound was muted against the US dollar in early European trading on Wednesday, hovering around the $1.2600 mark as traders await a raft of US economic figures, including the personal consumption expenditures (PCE) price index.

Investors will focus on core PCE inflation data as it is the Federal Reserve’s preferred inflation measure for decision-making on interest rates. The inflation data will influence market expectations for the Fed's likely interest rate action in its December meeting.

"The highlight of today’s session will be the release of the US October core PCE deflator, expected at 0.3% MoM. Even though the market has largely moved on from the US inflation story, a sticky reading will add to doubts that the Fed needs to cut in December after all. Expect the dollar to largely hold recent gains, although month-end selling remains a risk," ING said.

According to the CME FedWatch tool, the probability for the Fed to cut interest rates by 25 basis points to 4.25%-4.50% in the December meeting has increased to 65% from 56% a week ago.

Read more: FTSE 100 LIVE: Stocks slip as traders await US inflation data and mull Trump tariffs

The pound has also found some support amid expectations that the UK won't be severely affected by Trump's tariffs as it only runs a small trade surplus with the US.

"These factors could help contain GBP depreciation if the trade conflict escalates in the new year although the risks remain skewed to the downside indirectly via weakening growth in the euro-zone and globally that would see GBP suffer," according to MUFG analysts.

Meanwhile, the pound remained largely unchanged against the euro (GBPEUR=X), trading at €1.1974.

Gold (GC=F)

Gold prices bounced back after sinking over 3% in previous sessions as the demand for safe-haven assets surges once again and the dollar weakens.

Spot gold rose 1.5% to $2,653.39 per ounce, while US gold futures climbed 1.2% to $2,651.90 at the time of writing.

"Gold has been fluctuating alongside dollar volatility. Until we get more US economic data, the story remains about Federal Reserve policy, tariffs, and their impact on the dollar," said Kyle Rodda, financial market analyst at Capital.com.

"In the long run, I think Trump's trade war may be positive for gold because of higher debt loads and a touch of dedollarisation."

Goldman Sachs (GS) expects gold prices to reach $3,150 per ounce in a bullish scenario by December 2025, a 19% increase from current levels, as the precious metal continues to be a good hedge against sticky inflation and rising geopolitical issues.