Pound (GBPUSD=X)

The pound edged lower against the dollar on Friday morning, dipping 0.1% to $1.2651, as investors weighed the UK public finances and retail sales data.

Data from the Office for National Statistics (ONS) showed that the public sector was estimated to be in surplus by £15.4bn in January, which was the highest amount for the month since records began.

However, Capital Economics UK economist Alex Kerr noted that this figure was smaller than the Office for Budget Responsibility's (OBR) forecast for £20.5bn.

He highlighted that the current budget surplus, which is what chancellor Rachel Reeve's fiscal mandate is couched against, of £24.6bn is also less than the OBR's forecast of £30.4bn.

"Overall, today’s release will do nothing to reduce the chancellor’s challenges," Kerr said.

He explained that higher interest rate expectations and gilt yields than at the time of the autumn budget in October implied that Reeve's headroom against her fiscal mandate had been whittled down to £2.8bn from £9.9bn.

"Combined with the recent weakness of productivity and GDP [gross domestic product] growth, it may have been wiped out completely," Kerr said. "So in order to meet her fiscal rules, the chancellor will need to raise taxes and/or cut spending in the fiscal update on 26 March [in the spring budget]."

Read more: FTSE 100 LIVE: Markets make small moves as UK retail sales beat expectations in January

Meanwhile, separate ONS data released on Friday showed retail sales volumes rose 1.7% in January 2025, beating expectations of a 0.3% increase and followed a decline of 0.6% in December.

Charlie Huggins, head of equities at the Wealth Club, said the figures were not as good as they first appear. He pointed out that while food sales volumes were up 5.6%, non-food store sales volumes fell by 1.3% and clothing sales volumes were down 2.6%.

"Overall, aside from the major supermarkets, few retailers will cheer these figures," he said. "With inflation still elevated, and the dire state of government finances suggesting further tax rises could be on the cards, UK consumers are unlikely to be splashing the cash in 2025."

Sterling was slightly higher against the euro (GBPEUR=X) on Friday, rising nearly 0.1% to €1.2082.

Gold (GC=F)

Gold prices fell on Friday morning, after surging to record highs in Thursday's session on concerns about US trade tariffs and geopolitics.

The spot price fell 0.6% to $2,922.71 per ounce, while gold futures were down 0.7% to $2,935.10 per ounce.