As the final trading day of 2024 approached, the pound maintained its stability against the dollar, settling around $1.2552. Traders brace for a potentially tumultuous 2025, with cautious optimism surrounding sterling's future.
A Year of Uncertainty and Potential Upside
Economic Hurdles Loom Large
The upcoming year promises to be a testing period for the British economy. Market strategist Karl Schamotta from Corpay anticipates significant challenges for the pound, driven by domestic economic constraints, potential interest rate reductions, and external pressures like shifts in US policy. He projects that the Bank of England will likely cut rates more aggressively than expected, which could limit the currency's support against the euro. This dynamic may weigh heavily on the pound’s performance during the early part of 2025. However, Schamotta also envisions recovery opportunities later in the year. Once markets gain a clearer understanding of US policy directions, the GBP/USD pair could potentially surpass the $1.30 mark by year-end.Gold's Resilient Performance
Gold prices remained largely stable in the final trading session of 2024, with traders holding back on major moves ahead of key economic data. The spot price of gold inched up slightly to $2,616.97 per ounce, while gold futures increased by 0.3% to $2,625.40 per ounce. Peter Grant, vice president and senior metals strategist at Zaner Metals, attributes this subdued trading volume to the holiday season, noting that investors are preparing for new developments in the coming year. Gold is set to end 2024 with a remarkable 27% gain, marking its strongest annual performance since 2010. As a traditional hedge against inflation and economic uncertainty, bullion has benefited from broader market turbulence, despite some dampening effects from higher interest rates.Oil Prices Reflect Economic Optimism
Oil prices experienced moderate gains as strong economic data from China and a weakening US dollar provided support. Brent crude futures rose by 0.7%, trading at $74.48 per barrel, while US West Texas Intermediate (WTI) crude climbed 0.6%, settling at $71.42. China, the world’s largest oil importer, announced measures aimed at stimulating economic activity, including a record fiscal stimulus package worth 3 trillion yuan ($411bn/£327bn). These announcements have bolstered market sentiment and fueled expectations of increased demand. Positive signals also emerged from China’s non-manufacturing sector, with the December Purchasing Managers’ Index (PMI) hitting 52.2, exceeding forecasts. While the manufacturing PMI for December was slightly below expectations at 50.1, it still indicated ongoing growth. Despite these positive indicators, political uncertainties, particularly regarding trade policies under the incoming president-elect Trump, continue to influence market sentiment.Broad Market Movements
In broader market movements, the FTSE 100 (^FTSE) exhibited muted activity on Tuesday morning, trading at 8,120.94 points. Investors await further economic reports and policy announcements to guide their strategies. The subdued trading volume is typical of the holiday period, as market participants prepare for the new year’s developments. With fresh catalysts on the horizon, including next week’s US economic reports, market watchers are keenly looking for indications that could shape the Federal Reserve’s interest rate outlook for 2025. Conclusion
While the final trading day of 2024 saw relative calm in financial markets, the coming year promises a mix of challenges and opportunities. Economic data, policy decisions, and geopolitical factors will all play crucial roles in shaping the trajectory of currencies, commodities, and broader market trends. Investors and traders alike will need to stay vigilant and adapt to rapidly evolving conditions.READ MORE