The pound dropped to a one-month low against the dollar yesterday as Britain and the EU continued to lock horns over post-Brexit trade problems in Northern Ireland. Both sides have issued barbed threats this week in a stalemate that could overshadow the G7 international summit hosted by Britain this weekend.
Officials in Brussels claim their London counterparts have failed to implement checks on some goods moving from British shores to Northern Ireland and have commenced legal action over the government’s unilateral extension of a grace period. This could result in a court case or the eventual imposition of tariffs and quotas. In an amusing twist, the quarrel has been dubbed the “sausage war” by the media because of its impact on the movement of chilled meats.
Britain’s economy expanded by 2.3% in April as government restrictions that had suffocated economic activity were eased further, the Office for National Statistics said on Friday morning. It represented the fastest monthly growth of GDP since July 2020 and exceeded economists’ forecast of a 2.2% leap. Monthly GDP in April is estimated to have grown by 27.6% compared to 12 months earlier.
By this morning, the pound vs dollar rate had rebounded to within touching distance of the 1.42 resistance level.
US inflation soars to 13-year high
Consumer prices in the US grew by the most in almost 13 years last month as pent-up demand along with higher prices for goods raised concerns about inflationary pressures. Prices rose 5% in May compared with 12 months ago, the Bureau of Labour Statistics said yesterday. That marked the steepest increase since August 2008 and an acceleration from the 4.2% rise posted in April.
Excluding volatile items like food and energy, the core consumer price index jumped 3.8% in May on an annual basis, following a 3% rise in April.
The recent surge in prices has been driven by two factors: low levels of inflation at the beginning of the pandemic and the increasing price of goods and demand for rental cars, hotels and flights as the US economy reopened.
The number of Americans filing first-time claims for state unemployment insurance declined for a sixth consecutive week, as initial claims dropped by 9,000 to 376,000 in the week ended 4 June, the Labour Department said on Thursday. Continuing claims for ongoing state unemployment fell by 258,000 to 3.5 million in the week ended 29 May, representing the biggest decline since mid-March.
The only release of note left in the data diary this week is the Michigan Consumer Sentiment Index for June.