Retail sales for the last 3 months declined to a 6-year low and the latest inflationary figures shows the UK economy may be slowing down. Is the impact of Brexit starting to take form?

UK economy takes its foot off the pedal in early 2017

Yesterday the latest consumer price index figures (inflation) held steady for March as a fall in the cost of air fares set lower by the fall in the price of petrol offset other price increases seen this year.

The ONS (Office for National Statistics) showed no change to the 2.3% rise from the month before in February, the highest level recorded for inflation for 3 and a half years.

This has now posed the question whether the UK economy may start to be see a slowdown. On Monday, the BRC (British Retail Consortium) saw the biggest drop in retail sales for nearly 6 years during the past 3 months. With so much emphasis on politics since the beginning of the year, now that Article 50 has been invoked, economic data releases such as this week’s retail sales figures and inflation data could be pivotal in the future direction of the Pound.

Sterling continues to drop further

How will the MPC (Monetary Policy Committee) respond?

As rising inflation seems to have cooled (for now, at least) this raises the question of how will the MPC react? Stronger inflation means there is more likelihood the MPC will be forced to act, and namely raise interest rates, which could translate into Sterling strength. However, as inflation is starting to slow according to the figures released yesterday, will we see the Bank of England having to rethink a strategy? Recently, the Bank of England’s Vlieghe, a member of the monetary policy committee stated that there is no need for an imminent rate rise. His comments regarding tighter household incomes and the rise in inflation being temporary seem to have come true, and I for one am not betting on the MPC raising rates any time soon.

I am of the opinion that economic data will be scrutinised and keeping a close eye on data releases could help you to reach the buying or selling level that you desire if you move on a spike. Our well informed trading team here can be the eyes on the market for you, by keeping you up to date with the latest economic releases.

Important data release

Mark Carney is due to speak this morning and his comments could have the capability of moving exchange rates. During his speech, the highly influential claimant count (the number of unemployed people) in the UK will be released. If these figures come in worse than expected I wouldn’t be surprised to see a short term drop in the Pounds value.

There could be further movements for the Pound today off the back of Mark Carneys speech, it may benefit you to get in touch with us as early as possible if you have an upcoming currency requirement. Call us on 01494 725 353 or email me here for more information.

News

Read more articles
Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.