Pound (GBPUSD=X)

The pound edged higher against the dollar in early European trading on Friday, rising 0.1% to $1.2430, as investors remained focused on central bank interest rate decisions.

The European Central Bank (ECB) cut rates by 0.25% on Thursday, as expected, taking the benchmark rate on deposit facility from 3% to 2.75%.

The ECB said “economy is still facing headwinds but rising real incomes and the gradually fading effects of restrictive monetary policy should support a pick-up in demand over time".

This came a day after the US Federal Reserve announced that it was keeping its rates on hold in its first decision of the year. Fed chairman Jerome Powell said to reporters following the announcement that the central bank didn't "need to be in a hurry to adjust our policy stance", tempering bets of a cut in March.

Economic data releases in the US were also in focus, with fourth quarter gross domestic product (GDP) data on Thursday showing that the economy grew by 2.3%, which undershot expectations of 2.6%. The full-year figure came in at 2.8%, which was slightly below the 2.9% recorded in 2023.

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Jim Reid, market strategist at Deutsche Bank (DBK.DE), said that there was "little in the way of obvious warning signs, and the inflation numbers were broadly as expected too, with core PCE [personal consumption expenditures] running at a +2.5% rate.

"At the same time, there were fresh signs that the labour market was still strong into 2025, with the weekly initial jobless claims down to 207k in the week ending January 25."

Investors are now looking to the Bank of England's decision next Thursday, with the central bank expected to announce a rate cut.

The pound was flat against the euro (GBPEUR=X) on Friday morning, trading at €1.1954.

Gold (GC=F)

Gold prices were flat on Friday morning, hovering at record highs, on concerns around US president Donald Trump's trade tariffs plans.

The spot gold price traded at $2,794.29 per ounce, while gold futures steadied at $2,844.20 per ounce.

Trump said on Thursday that planned to follow through on his threat to impose 25% tariffs on Canada and Mexico on 1 February. However, Trump said he was still considering whether Canadian oil would be exempted from the levies.

Trump also suggested he was still considering imposing new tariffs on China, having previously put forward that 10% levy could be on the cards.

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Reid said: "We’ll have to wait and see just what measures are implemented, or indeed if last minute concessions might yet be reached, or if the most aggressive tariffs are short lived.