Inflation data causes Sterling weakness (Daniel Johnson)

UK Inflation influences GBP/EUR

Investors are showing concern at the rapid rise in inflation. The uncertainty regarding Brexit negotiations has made  GBP/EUR drop to 1.1170 of late. The weak value of Sterling has caused imports to become more expensive. Importers are then raising the value of their goods up and these price increases are then passed on to the consumer. If consumers become reluctant to pay these higher prices this is when we could see a slow down in the UK economy. It is important to keep an eye on average wage growth, if average wage growth is not rising at the same rate as inflation there could be trouble ahead.

Consumer Price Index (CPI) data was  released yesterday. CPI is a is a key barometer for inflation. Inflation dropped from 2.9% to 2.6% and the pound fell against the euro as a result. Although sterling fell in value following the data release, I am of the view a drop in inflation is a good for the UK economy as  the closer to average wage growth (currently 1.8%) the better for the UK economy. The drop in Sterling can be attributed to the fact a rate hike is now unlikely as the rise in inflation was the reason members of the MPC were considering a hike. I am not convinced a rate hike would be the cure for the problem. In order to for the pound to strengthen substantially the  stance on Brexit needs to be made clear and we need a firm government in place without constant threats to Theresa May’s position.

A  soft Brexit could still be a possibility with the freedom of movement of people required in order to have free trade. There will be need to be compromise,  a big change  to the previous “have your cake and eat it” plan.

If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker when the market is currently so hard to predict. If you let me know the details of your trade I will endeavour to produce a free trading strategy to suit your individual needs. Have faith knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving.  I can be contacted at [email protected] . (Daniel Johnson) Thank you for reading.