Pound (GBPUSD=X)

The pound was muted against the dollar in early European trading, at $1.2348, as the potential gains from a weaker dollar were capped by the latest figures that showed Treasury borrowing has already shot past official forecasts made in the budget.

The UK has already borrowed £4.1bn more so far this financial year than was projected by the Office for Budget Responsibility (OBR) in its updated estimates in October, official figures show.

Public sector net borrowing excluding banks climbed to £129.9bn in the eight months to December, compared to the OBR’s forecast that the figure would stand at £125.9bn.

Read more: FTSE 100 LIVE: Stocks rise as UK borrowing jumps unexpectedly

The pound, however, managed to maintain most of its gains from Tuesday, holding firm above the critical support level of 1.2300. The slight pullback comes as the dollar sees a mild recovery, with the US Dollar Index (DX-Y.NYB), which tracks the greenback’s performance against six major currencies, inching higher from its two-week low of 107.90.

Market experts now believe that the approach to tariffs will be more measured than initially feared, leading to a reduction in the risk premium attached to the dollar. With the prospect of more moderate tariffs, expectations for aggressive rate hikes have diminished, leading many to predict that the Fed will maintain its current key borrowing rates for the foreseeable future.

According to the CME FedWatch tool, traders are now overwhelmingly confident that the Federal Reserve will keep its benchmark interest rates within the 4.25%-4.50% range for at least the next three policy meetings.

Sterling was also flat against the euro (GBPEUR=X), at €1.1840.

Gold (GC=F)

Gold prices pushed higher for the third straight day amid the global flight to safety, with the precious metal hitting a new six-week high.

The spot price edged up by 1.4% to $2,757.66 per ounce, while gold futures rose 0.4% to $2,769.00 per ounce.

​"The rally from the lows of mid-December is intact, and with the price now through the $2,720.00 level the next target is the record high from late October at $2,790.00. Beyond this the price will move to fresh record highs," Chris Beauchamp, chief market analyst at IG, wrote.

Ongoing concerns about US president Donald Trump’s trade policies, particularly his proposed tariffs on imports from China and the European Union, have sent ripples through global markets, prompting investors to seek refuge in safe-haven assets like gold.

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