Pound (GBPUSD=X)

The pound has surged to a four-month high against the dollar, trading above $1.29, as investors assess the implications of US president Donald Trump's tariff policies.

On Wednesday, Trump threatened to impose retaliatory tariffs on the European Union (EU), following a warning from the 27-nation bloc about counter-tariffs on $26bn worth of US imports. This came after Trump's decision to enforce 25% tariffs on global imports of steel and aluminium took effect, prompting the EU to vow countermeasures.

Concerns of a potential trade war between the EU and the US have provided temporary support to the dollar. The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was finally steady after two weeks of decline.

Read more: FTSE 100 LIVE: Stocks muted and gold rises as traders weigh up economic impact of Trump's trade war

However, softer-than-expected US Consumer Price Index (CPI) data for February is likely to cap further gains for the dollar. The CPI report, released on Wednesday, revealed that both headline and core inflation slowed more than anticipated, dropping to 2.8% and 3.1%, respectively. This decline in price pressures could dampen expectations of further tightening by the Federal Reserve, which is seen as negative for the dollar.

Meanwhile, sterling was higher against the euro (GBPEUR=X) on Thursday morning, at €1.1907.

Gold (GC=F)

Gold prices edged up on Thursday morning, bolstered by softer inflation data in the US that fuelled expectations of interest rate cuts, while fresh tariff threats from Trump helped maintain the precious metal’s safe-haven appeal.

Spot gold rose 0.9% to $2,945.32 per ounce, while gold futures gained 0.2% to trade at $2,952.10.

Analysts at Macquarie Group have suggested that bullion could soar to an unprecedented $3,500 an ounce in the third quarter, as investors flock to safe-haven assets amid rising geopolitical tensions. Currently trading near $2,940 an ounce, Macquarie forecasts that gold could average $3,150 an ounce between July and September.

Read more: UK house prices expected to rise as buyer demand slows ahead of stamp duty increases

Gold came within $10 of its record high in overnight trading and has risen 12% this year, driven in part by Trump’s escalating global trade war, which has sparked retaliatory actions from China, the European Union, and Canada.

Adding to the uncertainty, fears of a potential federal shutdown in the US have also weighed on markets, as Senate Democrats failed to agree on a stop-gap funding bill on Wednesday.