Pound (GBPUSD=X)

The pound held steady against the dollar in early European trading, hovering at $1.2673. Market attention is primarily focused on the upcoming monetary policy hearings, where several Bank of England (BoE) policymakers, including governor Andrew Bailey, will answer questions from the Treasury committee about recent decisions regarding interest rates.

Traders are pricing in an 80% likelihood that the BoE will cut interest rates by 25 basis points to 4.50%, according to Reuters. This would mark the second consecutive rate cut by the Bank and the third such reduction this year.

Also on the horizon is Wednesday’s release of service sector inflation data, a key indicator closely monitored by BoE officials in their interest rate decision-making process.

"GBP-USD has gained some ground after putting in a floor at 1.26, but this looks to be some giveback on the long dollar Trump trade, rather than a more optimistic assessment of the UK growth outlook," Neil Wilson, chief market analyst at Finalto, said.

Meanwhile, against the euro (GBPEUR=X), sterling was marginally higher, trading at €1.1971.

Gold (GC=F)

Gold prices rebounded on after suffering their largest weekly decline since 2021, as traders recalibrated expectations for future US Federal Reserve rate cuts. The outlook for monetary policy has been influenced by the return of Donald Trump to the White House next year.

Spot gold rose 1.3% to $2,621.08 per ounce, while US gold futures edged 0.3% higher to $2,624.10 at the time of writing.

The prospect of Trump’s policies potentially driving inflation has led swaps traders to predict a near 50% chance of a Fed rate cut next month, prior to his inauguration. This could benefit gold, as lower interest rates make the non-yielding metal more attractive.

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“Whether the Federal Reserve cuts or not, I think gold technically looks like it wants to get back near that $2,700 level,” Daniel Pavilonis, senior market strategist at RJO Futures, told Reuters.

The pause in the US dollar’s rally, which recently surged to a one-year high before retreating, has also made gold more accessible to investors.

Goldman Sachs, in its 2025 commodity outlook, highlighted gold as a top pick, suggesting the precious metal could see further gains during Trump’s presidency. "Go for gold," analysts led by Daan Struyven wrote in a note.

Oil (BZ=F)

Oil prices were lower on Tuesday, following a strong rally the previous day. The rally was spurred by a halt in production at Norway’s Johan Sverdrup oilfield, as well as ongoing concerns over the Russia-Ukraine conflict.