Surging inflation


After almost a week of fighting back, the Pound has finally fallen to the Dollar’s strength and dropped down to its lowest level since November 2020. Earlier this morning the Pound was supported by soaring inflation figures but the effect of this has since been shrugged off. The Office for National Statistics reported that the Consumer Price Index has risen to an eyewatering 7%, smashing market expectations of 6.7%. Also in the UK, data on the Core Inflation Rate beat market consensus, coming in at 5.7%. These record inflationary levels have once again amounted calls for the BoE to raise interest rate in a bid to combat this. However, the recent dovishness of the BoE has meant that the Pound couldn’t fully capitalize on this data as markets questioned whether the Bank would follow through with numerous rate hikes as the cost-of-living crisis still remains a very prevalent issue. The US is also experiencing record breaking inflation levels, with data released yesterday indicating an Inflation Rate of 8.5%. With this many investors overlooked the UK’s inflation data as expectations peak for the Federal Reserve to tweak their interest rates in the near future, leaving the Pound vulnerable to downwards pressure.


The Pound has also slipped slightly against the Euro at the time of writing, as it struggles to maintain gains we saw in yesterday’s trading. Reports on inflation released in the UK this morning in which we saw some of the highest levels in 30-years failed to provide much impetus. With these blisteringly high levels fears for the UK economy dampened the impact of this data release, with growing concern over living standards and overall consumer confidence, limiting the Pounds upside growth. On the contrary, the Pound may still find a degree of support as calls intensify for the BoE to raise interest rates. As for the Euro, it is still dented from a deteriorating sentiment in Ukraine as Russia was recently accused of using chemical weapons. This will likely keep the Euro on the backfoot for the time being as investors take a very cautious approach to the currency, waiting for any positive developments. For trading today, it is likely that the rate will remain close to the current levels that it is in.

Published by Frank Brightman (13/04/2022)

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