Asset Summary – Friday, 10 October
GBPUSD faces downward pressure as the British pound weakens against a strengthening dollar amid anxiety surrounding the upcoming UK budget. The anticipation of tax increases to achieve fiscal goals is raising concerns about the potential negative impact on the already vulnerable UK economy, further diminishing the pound’s appeal. While modest growth is predicted for the remainder of 2025, persistent inflation, twice the Bank of England’s target, coupled with delayed expectations for interest rate cuts until April next year and a cautious approach from the BoE favoring inflation control over growth initiatives, suggests a challenging outlook for the currency pair, potentially favoring dollar strength in the near to medium term.
EURUSD faces downward pressure due to a combination of political uncertainty in France and concerning economic data from Germany. The euro’s weakness stems from investor anxiety surrounding potential political instability in France, although indications of avoiding snap elections offer some reassurance. However, this is counteracted by disappointing German export and import figures, coupled with prior declines in industrial output and factory orders, painting a concerning picture for the Eurozone economy overall. These factors suggest a potentially weaker euro relative to the US dollar.
DOW JONES experienced a decline in the prior session and faces a mixed outlook. While US stock futures indicate a slight upward movement Friday, the failure of the Senate to reach a funding agreement and the ensuing government shutdown create uncertainty, particularly given the delay of crucial economic data that could inform the Federal Reserve’s policy. Investors are now focused on upcoming third-quarter earnings reports, especially from major banks like Citigroup and JPMorgan, for insights into the overall economy and the sustained momentum of artificial intelligence. However, positive results from companies like Delta Air Lines and PepsiCo, reflecting consistent consumer demand, could provide some support.
FTSE 100 experienced a decline, closing lower than its intraday high, indicating some downward pressure on the index. Several large companies trading without dividend entitlement contributed to this, as did significant losses in the banking sector due to specific news impacting HSBC and Lloyds. HSBC’s strategic shift concerning its Hang Seng unit and Lloyds’ potential compensation payouts weighed heavily on investor sentiment towards these stocks. However, gains in IAG, driven by positive earnings reports and an optimistic outlook from a major airline, alongside strength in base metal miners like Anglo American due to rising copper prices, partially offset these negative influences, suggesting a mixed trading environment.
GOLD is demonstrating a bullish trend, approaching potentially record-breaking territory, fueled by a confluence of factors. Economic anxiety, driven by the US government shutdown and concerns about the labor market, are contributing to its appeal as a safe-haven asset. Further bolstering its value are expectations that the US Federal Reserve may implement interest rate cuts, despite concerns about inflation. However, traders should be aware that the strengthening US dollar and profit-taking could lead to temporary pullbacks, as evidenced by the recent dip following ceasefire news in the Middle East. Overall, the environment suggests continued upward pressure on gold prices, but with potential volatility.