Tag Archives: inflation

UK inflation Soares to a 40-year high.

GBP

The British Pound was higher after it was announced UK inflation hit 10.1% in July smashing expectations by a substantial amount which leaves it more than five times higher than the Bank of England’s target.

The new 40-year high for inflation means another 50 basis point hike from the Bank in September is likely. The Bank of England expects inflation to hit 13.3% in October when the energy price cap is due to rise again, raising household bills for millions of people.

UDS

From a currency viewpoint, the US market updates had no noticeable impact on the dollar. Indeed, most of the FX majors have been confined to fairly narrow trading ranges.

The minutes of the US Federal Reserve’s July policy meeting will be released today. These have been partially superseded by subsequent developments and updated comments from Fed policymakers have already made their latest position clear.

They remain focused on bringing inflation down to target and think further interest rises will be necessary. However, some of the meeting detail may provide new insights.

EUR

Today’s Q2 GDP report for the Eurozone is a second reading. It is not expected to be revised from the initial estimate of quarterly growth of 0.7%.

However, it will provide further details on the drivers of growth. Despite Q2’s upside surprise, ongoing concerns about the Ukrainian crisis and the impact on spending power from high inflation still point to downside risks for growth in the second half of the year. 

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.

GBP/USD Grinds near month high

GBP

The Bank of England delivers its next policy decision on 4th August with a high probability of an outsized 50 basis point hike. However, whether this is followed up with a similar-sized hike in September is less certain.

Currently, markets are positioned for Bank rates to rise all the way to 3.0%, The tightness in UK labour markets that is generating wage increases should ease and inflation will likely fall rapidly in 2023.

USD

The big macro news today was that from the U.S. where the first estimate of the second quarter GDP confirmed the U.S. was in a recession.

Although the dollar fell against some currencies, it held its own relatively well against the euro and pound.

Looking ahead today, Core PCE inflation is expected to remain at 4.7% in June. US income and consumption data for June will also feature.

EUR

Annual Eurozone CPI inflation for July is expected to post a modest fall when compared to June.

That is primarily due to the fall in energy prices during the month. In contrast, the core measure is expected to pick up slightly an indication that inflationary pressures may be broadening out.

Eurozone recession fears have risen sharply this week amidst news of restricted Russian gas flows and fears of Eurozone-wide gas rationing this winter.

Germany, the Eurozone’s manufacturing powerhouse and the largest economy is particularly exposed to gas shortages and rationing is likely over the winter months.

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision making during this difficult time to help you protect your profits.