Pound (GBPUSD=X)

The pound strengthened against the dollar in early European trading on Monday, climbing 0.3% to $1.2202 as the greenback weakened ahead of Donald Trump’s inauguration.

Market focus is squarely on the political scene in the US this week, with Trump’s "day one" policy declarations expected to shape market sentiment and influence the direction of the dollar.

“Donald Trump’s inauguration on Monday will be the main event,” said Galina Pozdnyakova, a research analyst at Deutsche Bank.

Read more: FTSE 100 LIVE: London stocks rise as Donald Trump prepares to take office

Traders are closely watching for early policy announcements on issues such as tariffs, taxes, and immigration, with tariffs set to be the key focus for foreign exchange traders.

“The relief rally may not last, with attention turning to US politics and president-elect Donald Trump’s inauguration on Monday. Since the presidential election, markets have been gripped by uncertainty over what Trump may do in office. Questions over how high tariffs will rise,” said Philip Shaw, an analyst at Investec.

Sterling was lower against the euro (GBPEUR=X), slipping 0.2% to €1.1825.

Gold (GC=F)

Gold prices remained steady on Monday as traders braced for increased volatility with the start of Trump’s second term. Anticipated policy announcements from Trump are expected to significantly influence market dynamics.

The spot price of gold edged up by 0.1% to $2,706.72 per ounce, while gold futures held relatively unchanged at $2,749.00 per ounce.

The precious metal, often seen as a safe-haven asset, has held steady near a one-month peak, supported by subdued US inflation data that has fuelled expectations for further rate cuts from the Federal Reserve.

Market sentiment is currently shaped by the interplay between potential US policy shifts and the Fed's monetary stance. Analysts suggest that a robust start to Trump’s second term could strengthen the dollar, while a more gradual approach may weaken it, which could in turn influence gold prices.

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“The uncertainty in regard to the policies that president Trump is going to put in place has been one of the supportive factors for gold,” said David Meger, director of metals trading at High Ridge Futures.

Oil (BZ=F, CL=F)

Oil prices were lower, as expectations of Trump relaxing curbs on Russia's energy sector in exchange for a deal to end the Ukraine war offset concerns about supply disruption from harsher sanctions.

Brent crude futures lost 0.3% to $80.55 per barrel, while US West Texas Intermediate (WTI) crude slipped by the same margin to $77.67.