Inflation and the UK economy

The recent fall in Sterling’s value following our decision to leave the EU combined with our current ‘hard’ stance from our Prime Minister Theresa May regarding negotiations will cause inflation to rise on products such as food according to bank governor Mark Carney. This means that the cost of everyday items will increase, and those on low incomes could feel the pinch the most. However, Mark Carney made it absolutely clear that Sterling’s recent fall has helped the economy to adjust.

Following his comments government bonds rose to their highest level since the referendum, and the pound recovered some of Friday's losses against a basket of currencies.

UK consumer price index

On Tuesday, the keenly awaited inflation figures for September will be released. This data release will carry extra significance following the recent disagreement between Tesco and Unilever last week over the price of goods. Unilever wants a 10 percent rises in prices to cover the recent drop of Sterling’s value, while Tesco quite simply won’t increase their prices.

The official Consumer Price index will reveal if these arguments means higher prices for the consumer. The expected rise is to 0.9% from August’s reading of 0.6%. If this reading is above this, the pound could strengthen further as the economy moves closer to its 2% target level. Tuesday has the makings to be an explosive day on the currency market, therefore I would suggest getting in contact with the team here at Foreign Currency Direct to make sure you are prepared.

A busy week ahead for sterling, does this mean Sterling strength?

There is a host of economic data due to be released this week that could present a much needed window of opportunity for clients selling sterling to buy foreign currency. As I have mentioned, Tuesday we have inflation data, followed by the Average Earnings report on Wednesday and Retail Sales figures on Thursday. I personally believe that with the focus very much on economics this week, we could see more promising signs that the UK economy is continuing to perform despite our decision to leave the EU. If have a currency requirement register your interest early with our team. In such a volatile market holding out could be expensive, it may be wise to capitalise on this week’s potential gains.

Many thanks for reading my report this morning. For more information on how this weeks economic releases could impact your currency needs, call our trading floor on 01494 725 353.


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