EBC Markets Briefing | Pound strengths; bullion price unstoppable

The pound rose on Monday, building on gains made last week after the BOE delivered a widely expected rate cut, but suggested that the bar for further declines was high.

Britain's economy grew by 0.1% in Q3, in line with the office's initial estimate. Money markets show there will be at least one rate cut in the first half of the year, and place a roughly 50% chance on a second before the year-end.

Britain's account deficit in the period totalled 12.1 billion pounds, compared with a Reuters poll forecast of 21.1 billion pounds and equivalent to 1.6% of GDP – a relief for Finance Minister Reeves.

Meanwhile, households saved as they felt the hit from higher taxes but still increased their spending, according to official data which confirmed a slowdown in the broader economy.

Labour market is showing clearer signs of strain, with rising unemployment and slowing pay growth in October pointing to a more challenging operating environment for businesses as they plan for 2025 and beyond.

With the Fed expected to deliver at least two more rate cuts next year, the dollar is under pressure against most currencies. Wall Street banks are forecasting that the US dollar will resume its slide next year.

Sterling managed to rebound despite the death cross pattern, but the room for further upside seemed limited given RSI approaching 70. As such it will likely face strong resistance at $1.35.

Asset recap

As of market close on 22 December, among EBC products, VanEck Junior Gold Miners ETF led gains. The gold price rose above $4,400for the first time on growing safe haven demand.

Merck just announced a historic agreement with the Trump administration to ensure its prescription medicines are both accessible and affordable for Americans.

The Australian dollar gains ground following the release of the RRBA minutes of its December meeting which showed that board members were less confident that monetary policy remains restrictive.

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