Pound (GBPUSD=X)

The pound briefly rose against the dollar on Wednesday, before giving up all its gains, after data showed that UK inflation rose faster than expected in January.

The Office for National Statistics (ONS) said the consumer price index rose at an annual rate of 3% in January, above forecasts for a rise of 2.8%. This weakened the case for the Bank of England to deliver another two interest rate cuts this year.

Financial markets have reduced expectations of an interest rate cut in March, with the probability of a reduction dropping to 17% from 24% following the inflation spike.

Read more: UK inflation rise is a blow to Bank of England interest rate cut path

Threadneedle Street said this month that price pressures were on “a bumpy path” as it forecast that inflation would rise to 3.7% in the middle of the year.

Sterling spiked after the numbers, but quickly fell back to below where it was before the data. It was down 0.3% to $1.2587 at the time of writing.

The US dollar index wobbled around 107.00 during the session, ahead of the release of the Federal Open Market Committee (FOMC) minutes for its January meeting. This will be published at 7pm UK time, with traders focused on cues about how long the Federal Reserve will keep interest rates steady in the range of 4.25%-4.50%.

Against the euro, the pound held steady at 82.7p.

Gold (GC=F)

Gold prices rose 0.5% to $2,962 as traders shift their holdings on concerns about potential US tariffs on precious metals.

It comes amid predictions that gold will rise to $3,000 per troy ounce by the end of 2025, with global central banks expected to maintain their gold buying momentum.

The price of gold is forecasted to climb to $3,100 or even $3,200 an ounce, according to strategists at Goldman Sachs and UBS.

Joni Teves of UBS said her team predicts "a more forceful rally" than previous expectations, which is likely to be driven by three factors, led by a "deep-rooted bullish sentiment, with gold seen as a safe-haven asset amid a highly uncertain and volatile macro environment".

"FOMO", or fear of missing out, is another factor, with a "continued lack of investor positioning" suggesting there is plenty of scope for investors to add gold to portfolios, as well as stronger-than-expected official sector demand.

Read more: UK inflation jumps more than expected to 3% in January

Rick Kanda, managing director at The Gold Bullion Company, said: "With rumours circulating about a gold shortage, it is no surprise that we are seeing panic buying of gold. But buyers do not need to be too concerned, as the movements between the Bank of England and the US are very unlikely to cause much direct impact on supplies. These moves are primarily institutional repositioning of vaulted metal.