Residual momentum from last Thursday’s interest rate cut helped sterling start the shortened week well. With a threadbare Christmas schedule of economic news, the pound strengthened by almost half a cent against both the euro and the US dollar.
The geopolitical picture also had a major part to play in Monday’s trading. Reports that Israel was planning an attack on Iran precipitated a flight toward safe-haven assets, although that did not include the US dollar, which has its own shifting monetary policy outlook to contend with and the possibility of a confrontation with Venezuela.
A softer dollar left the door wide open for gold to benefit from those flows and set a fresh record above $4,400 per troy ounce. The defensive asset does well at times of market stress as it tends to hold its value through conflicts and other disruptions.
China has slapped tariffs of up to 42.7% on some dairy products from the eurozone. That decision came after strains in China’s domestic market, which had previously been countered by retaliatory EU levies on electric vehicles.
Ultimately, yesterday was a subdued session across financial markets. The majority of bank staff and investors in the Western world have shut their laptops until the New Year amid a slowing economic indicator calendar. Focus will turn almost exclusively to geopolitical developments following this afternoon’s growth data from across the Atlantic.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract or call your account manager on 020 7898 0541 to get started.
