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Gold and silver's record-breaking rally continued to fade on Monday as the US dollar stabilised.
The price of gold and silver fell again on Monday (albeit at a slightly more polite pace), resuming a slide that began last week on the back of policy news from the United States.
Precious metals have lost close to 10% since Friday morning, while the US dollar enjoyed its strongest day in more than six months to end last week. The dollar stabilised further yesterday with positive factory data providing another pressure valve. Sterling and the euro struggled to mount much of a defence ahead of interest rate decisions from their respective central banks on Thursday.
The other main influence on the US dollar this week is likely to be Friday’s non-farm payrolls report. But before that, the ISM manufacturing purchasing manager’s index (PMI) came in well above forecasts at 52.6 in January – the survey’s highest score since August 2022.
There was also positive news for the UK’s manufacturing businesses. S&P Global revised up its preliminary PMI score to a seventeen-month best.
Meanwhile, house prices ticked up last month in Nationwide’s British property survey. The 1% pace of annual growth is still notably below the recent average.
Australia’s central bank voted to hike interest rates by a quarter point, taking the terminal rate from 3.6% to 3.85%. The Australian dollar enjoyed a positive Monday, strengthening against the pound and finished broadly level against a resurgent US dollar as markets anticipated tighter monetary policy.
Finally, UK civil servants working at the Treasury are being offered £100,000 to leave their posts as part of a drive to reduce headcount by 300. The Chancellor is looking to cut more than 10% of her staff by 2030 in an effort to reduce costs at the heart of government.
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GBP: A pause in the rally
Momentum generated in the second half of January went on pause to start this week. Against a rallying US dollar, sterling could find little momentum as investors remained cautious ahead of Thursday’s Bank of England decision.
GBP/USD: the past year
EUR: Another upgrade not enough
Hamburg Commercial Bank (HCOB) joined organisations in the UK and the USA in upgrading its initial estimate of German manufacturing output last month. Still, the euro struggled against the US dollar and weakened by about a third of a cent of a cent against the pound on Monday.
GBP/EUR: the past year
USD: The Warsh effect
Kevin Warsh is heir apparent to current Federal Reserve chair Jerome Powell when his term ends in May. The prospect of a more hawkish chair than markets feared was enough to send investors charging away from an over-valued commodities market and stabilising the US dollar. There is still a risk that a Warsh Fed would take its direction from the White House, but that was clearly an argument for another day.
EUR/USD: the past year
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