The pound was steady against a weaker dollar, trading at $1.2632 in early European trading, as market speculation mounted over a potential interest rate cut by the US Federal Reserve in June.
The US Dollar Index (DX-Y.NYB), which tracks the greenback’s value against six major currencies, fell to 106.10, its lowest level in nearly 12 weeks. The drop follows weaker-than-expected data from the US services sector, which was revealed last week.
The preliminary S&P Global Purchasing Managers Index (PMI) report for February showed a marked slowdown in business activity. The Composite PMI stood at 50.4, down from 52.7 in January, as the services sector activity unexpectedly contracted.
According to the CME FedWatch tool, the likelihood of the Fed maintaining interest rates within the current range of 4.25%-4.50% has dropped to 41.1%, down from nearly 50% before the PMI data was released last Friday.
"Similar to US equities, the US dollar is seen as expensive relative to other global currencies. Thematic trends in the G10 FX market indicate a preference for 'cheaper' assets, which has contributed to some softening in the USD," Deutsche Bank analysts noted.
Meanwhile, sterling was lower against the euro (GBPEUR=X) on Monday morning, at €1.2058. The euro gained ground after European investors expressed relief over the outcome of Germany’s election, though concerns lingered over a Wall Street slump at the end of last week.
The euro hit a one-month high following the centre-right CDU/CSU alliance’s victory in the German election, securing 28.5% of the vote. The result paves the way for CDU leader Friedrich Merz to become Germany’s next chancellor, contingent on the formation of a coalition government.
Gold prices remained near record levels on Monday, buoyed by a weakening dollar, as market attention shifted to a crucial inflation report set for later this week.
The spot price of gold rose by 0.2%, reaching $2,942.05 per ounce, while gold futures rose by 0.1% to $2,957.00. The yellow metal reached an all-time high of $2,954.69 last Thursday.
"Disappointing US macro data at the tail end of last week has caught up with the dollar, which has opened the door higher for gold," said Tim Waterer, chief market analyst at KCM Trade. "With trade uncertainties not looking like they are disappearing anytime soon, gold could still be eyeing off reaching new all-time highs again this week."
Gold hit a series of record highs last week, driven by sustained haven buying following president Donald Trump’s threats of additional trade tariffs. Worries about a potential US economic slowdown also fuelled demand for gold, especially after weak purchasing managers’ index (PMI) and consumer sentiment data.
A drop in the dollar — on growing expectations that a softer economy may prompt more interest rate cuts — helped lift broader metal prices as well.
Oil prices retreated on Monday, extending losses from the previous week, as the prospect of resumed exports from Kurdistan’s oilfields weighed on the market. Investors also awaited further clarity on peace talks aimed at resolving Russia’s war in Ukraine.
Brent crude futures dropped 0.4% to $73.79 per barrel, while US West Texas Intermediate (WTI) crude fell 0.3%, to $70.20 per barrel.
The Kurdistan Regional Government (KRG) announced on Sunday that it had reached an agreement with Iraq to resume oil exports.
Iraqi deputy oil minister Basim Mohammed Khudhair told the Iraqi News Agency (INA) that technical teams from the Iraqi state-run North Oil Company and KRG representatives are continuing to inspect and assess the readiness of export pipelines for oil re-pumping.
Khudhair indicated that the first phase would see 185,000 barrels per day exported, with the volume expected to gradually rise to 400,000 barrels.
"The downward spiral in crude oil prices is driven by pressure from the US president on Iraq to resume oil exports from Kurdistan’s oilfields, which could improve supply flows in global oil markets after nearly two years of disruption," said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet, according to Reuters.
Meanwhile, oil market sentiment was also influenced by developments surrounding the Russia-Ukraine war. Trump’s special envoy, Steve Witkoff, stated on Sunday that the US is "very close" to reaching a peace agreement between Ukraine and Russia.
Speaking to CNN, Witkoff commented: "The war didn’t need to happen. It was provoked. It doesn’t necessarily mean it was provoked by the Russians." He added that "cogent and substantive negotiations" under the 2022 Istanbul Protocol Agreement framework could be used as a basis for a deal.
"We came very, very close to signing something, and I think we’ll be using that framework as a guidepost to reach a peace deal between Ukraine and Russia," he said.
In broader market movements, the FTSE 100 (^FTSE) edged up slightly on Monday morning. For more details, check our live coverage here.
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