The pound retreated against the dollar, slipping 0.2% to $1.2972, after the release of UK labour market data for three months ending January.
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UK pay growth was steady but remained above inflation ahead of the Bank of England‘s (BoE) latest interest rate decision.
UK average weekly earnings excluding bonuses rose 5.9% in the three months to January on an annual basis, according to data from the Office for National Statistics. That was unchanged from from the previous three months but continued to outstrip inflation, which rose to 3% in January.
Meanwhile, annual wage growth in real terms — adjusted for inflation — was up 2.2% from the previous year.
The ONS reported that 124,000 people reported they had been made redundant in November-January, or 4.2 in every thousand employees. This is up from 99,000 in August-October, and is the highest level since the November 2023-January 2024 quarter, when 133,000 people (or 4.6 in every thousand workers) were made redundant.
Read more: UK pay growth stays above inflation ahead of Bank of England interest rate decision
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, turns sideways around 103.66 after the Federal Reserve’s monetary policy decision on Wednesday.
The rate-setting Federal Open Market Committee kept its key borrowing rate targeted in a range between 4.25%-4.5%, where it has been since December. Officials now see the US economy accelerating at just a 1.7% pace this year, down 0.4 percentage point from the last projection in December.
Meanwhile, the pound was higher against the euro (GBPEUR=X) on Thursday morning, at €1.1932.
A stronger pound may seem like good news for Britons planning holidays abroad, offering more purchasing power to buy dollars or euros. However, the benefits of a higher currency value come with economic trade-offs. While travellers might enjoy better exchange rates, a stronger pound can make the UK economy less competitive on the global stage.
When the pound appreciates, British goods and services become more expensive for foreign buyers, leading to a slowdown in exports. This reduced demand for UK-made products can dampen growth in key sectors, while also discouraging foreign investment. Over time, these factors contribute to weaker economic performance, lower productivity gains, and, ultimately, a decline in living standards for many.
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Gold prices soared to an all-time high, following remarks from US Federal Reserve chair Jerome Powell as the Fed held interest rates steady as anticipated, but signalled a possible reduction in borrowing costs by half a percentage point by the end of this year.
Spot gold rose 0.3% to $3,042.64 per ounce, while gold futures climbed 0.2% to $3,048.50. The precious metal hit an all-time high of $3,051.99 earlier in the session.
“Gold rallies to another historic high after a truly virtuoso performance by Chair Powell — as stocks and bonds also rally,” said Tai Wong, an independent metals trader.
“Gold is in a bull market after surging strongly above $3000 and will continue to move higher on ‘elevated’ uncertainty and fear of higher inflation.”
“The market is thinking, buy gold no matter what,” he added.
Read more: FTSE 100 LIVE: Stocks mixed as Bank of England expected to leave UK interest rates on hold
Bullion has climbed 16% this year, extending last year’s strong performance. Investors usually flock to the yellow metal for a safe haven amid a gloomy outlook for both the US and global economy.
“While the market has drifted into technical overbought territory, we think the prevailing mood among investors remains cautious, which is likely to support the appetite for gold,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“Gold remains a key portfolio hedge against near-term uncertainty, but also against episodic bouts of risk aversion further out.”
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Oil prices rose on Thursday, driven by a robust demand forecast in the United States and a weaker dollar.
Brent crude futures rose 0.8% to $70.88 per barrel, while US West Texas Intermediate (WTI) crude climbed 0.7% to $67.68 per barrel.
US government data revealed a larger-than-expected drop in distillate inventories, including diesel and heating oil, which fell by 2.8 million barrels last week.
“US oil demand outlook remains healthy despite lower air travel passenger volumes,” JPMorgan (JPM) analysts said in a note. They added that reduced travel activity in the U.S. did not indicate a broader weakness in demand. Global oil demand averaged 101.8 million barrels per day (bpd), marking an annual increase of 1.5 million bpd, according to the bank.
Despite the drawdown in distillates, US crude inventories rose by 1.7 million barrels, surpassing the 512,000-barrel increase predicted in a Reuters poll.
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A weaker dollar also supported oil prices, with the US currency continuing its decline since the end of February.
“Throughout the week, the weakness of the dollar appeared to provide some support for dollar-denominated oil prices,” said Phillip Nova senior market analyst Priyanka Sachdeva.
Investor optimism about a potential Federal Reserve rate cut also played a role, with some anticipating a 50-basis-point reduction by the end of the year.
However, some analysts cautioned that the oil market may experience uneven price movements in the short term.
“I am expecting a choppy upward drift in the oil markets right now,” said OANDA’s senior market analyst Kelvin Wong, adding that bullish price drivers are stimulus measures out from China and the return of hostilities between Israel and Hamas.
In broader market movements, the FTSE 100 (^FTSE) was higher on Thursday morning, up 0.3% to 8,736.981 points at the time of writing. For more details, check our live coverage here.
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