We have just heard the latest inflation figures for the UK and they have come inline with expectations with Consumer Price Index at 2.6% the same level as last month. The figures released by the Office for National Statistics shows the price difference between a shopping basket of goods and services and therefore gives a good indication of UK inflation. High inflation can usually lead to Sterling strength as it means there is a chance we will need to see interest rates increased to help keep inflation in check (the target rate of inflation is 2%) however at the moment should the UK economy remain under its current constraints it will be very difficult for the Bank of England (BoE) to raise interest rates so it will be a relied for the Bank that inflation has remained close to the target level.
Moving forward inflation could be a key factor to effecting Sterling exchange rates as if inflation starts to rise next year it may put pressure on the BoE to consider raising interest rates which could help boost Sterling but in the slightly longer term may hinder the UK economy and therefore lead to Sterling weakness. This is just one of many economic data sets that shows just how unpredictable the UK economy and therefore Sterling exchange rates can be. If you need to send money abroad and are looking for the best exchange rates make sure you speak to one of our experienced currency brokers who will be happy to discuss your currency requirements and the options available to you.
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