Pound slips as markets await news of tariff deals
Trump warned overnight that he will impose a new 10% tariff on any country that aligns itself with the Brics group of developing nations, claiming they are 'anti-American'.
The warning comes as the US finalises trade deals with a number of partners, while Washington is expected on Monday to begin informing other trade partners of the tariffs it has settled on. They will be implemented from 1 August, according to the president.
"The 90-day US tariff pause began on 2 April and is set to expire on Wednesday, leaving markets uncertain about what comes next. Trump announced on Sunday that the higher tariffs are set to take effect on 1 August, but countries without a bilateral deal will be notified by the 9 July deadline," said Shane Strowmatt, an analyst at LGT, a private bank.
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Brics is a grouping that includes Brazil, China, Russia, South Africa and India.
The US Dollar Index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was steady at 97.19.
In other currency moves, the pound was basically flat against the euro, at €1.1585 at the time of writing.
Gold prices lost ground in early European trading, pressured by a steady US dollar and tempered investor expectations of imminent interest rate cuts by the Federal Reserve.
Gold futures retreated 0.8% to $3,316.20 an ounce, while spot gold lost 0.7% to $31253 per ounce.
The pullback followed stronger-than-expected US employment data last week and a postponement of a US tariff deadline.
The prospect of renewed trade tensions provided limited support for safe haven assets, as Trump deferred his proposed tariff implementation deadline to 1 August, rather than 9 July as initially suggested.
Analysts said gold prices were more directly weighed down by the dollar, which held on to most of its gains from last week. The greenback was buoyed by last week's robust non-farm payrolls report, which showed continued strength in the US labour market.
Read more: FTSE 100 LIVE: Markets mainly fall as Trump threatens extra 10% Brics tariff for 'anti-American' policies
However, the dollar's biggest point of support was a sharp scaling back in expectations that the Federal Reserve will cut interest rates at its next two meetings.
Data from the CME FedWatch tool showed traders largely unwinding bets on a July rate cut, and increasingly their positions for the Fed to hold steady in September. Higher interest rates typically support the dollar and weigh on non-yielding assets like gold, which is priced in dollars.
Despite the recent retreat, gold remains more than 25% higher in the year to date and is trading about $190 below its April all-time high. The metal has drawn sustained support from safe haven demand amid persistent geopolitical tensions and persistent trade uncertainties.
The rally has also been fuelled by inflows into bullion-backed exchange-traded funds and continued purchases by central banks.
Oil prices retreated on Monday morning after Opec+ announced a sharper-than-anticipated increase in production for August, stoking concerns over a potential oversupply and weakening demand outlook amid global trade uncertainty.
Brent crude lost 1% to $68.14 a barrel, while West Texas Intermediate dropped by 0.8% to trade at $66.45.
The move caught markets off guard, as the group of oil producers opted to raise output by more than the monthly increases of 411,000 barrels per day it had approved for May through July, and well above the 138,000 bpd added in April.
"The increased production clearly represents a more aggressive competition for market share and some tolerance for the resulting decline in price and revenue," Tim Evans of Evans Energy said in a note.
The decision comes as concerns mount over the impact of potential US tariffs on global economic growth, with uncertainty around trade policy weighing on forecasts for oil demand in the second half of the year.
Goldman Sachs analysts said they now expect Opec+ to approve a final 550,000 bpd increase for September at its next meeting scheduled for 3 August. In a research note issued on Sunday, the bank wrote: 'Saturday's announcement to accelerate supply hikes increases our confidence that the shift, which we started flagging last summer, to a more long-run equilibrium focused on normalising spare capacity and market share, supporting internal cohesion, and strategically disciplining US shale supply, is continuing.'
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In equities, the UK's FTSE 100 (^FTSE) was lower, down 0.2% to trade at 8,8033 points. For more details follow our live coverage here.
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