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Pound slides as UK inflation hits 40-year high

currency-newsPound slides as UK inflation hits 40-year high
The pound fell sharply yesterday after the UK inflation rate jumped from 7% to 9% – its highest level since 1982.

Sterling is climbing this morning, with GBP/EUR moving up to €1.1816 and GBP/USD firming to $1.2405. GBP/CAD is heading above C$1.5924, while GBP/AUD and GBP/NZD have risen to AU$1.7758 and NZ$1.9579, respectively.

Today’s key release will be the minutes from the European Central Bank’s (ECB) April policy meeting. EUR investors will be hopeful of a hawkish tone from the bank, which would likely boost the euro.

What’s been happening?

Pound Sterling slipped during yesterday’s session after UK inflation jumped to a 40-year high of 9%.

Rather than boosting Bank of England (BoE) rate hike bets, the CPI fuelled fears around the UK cost-of-living crisis. Some economists fear the UK is heading for a recession.

Meanwhile, the euro wavered as eurozone inflation held at 7.4%, rather than rising to 7.5% as was expected.

EUR investors seemed slightly disappointed with the result as it puts less pressure on the ECB to hike interest rates.

The US dollar wavered yesterday, though it gained against its weaker rivals, as a mixed market mood left the safe-haven currency without a clear direction.

What’s coming up?

During today’s session, the Confederation of British Industry’s (CBI) industrial trends orders could impact the pound, although GBP investors may be more focused on domestic issues, such as Brexit and the cost-of-living crisis.

EUR investors will be eagerly awaiting the ECB’s meeting minutes from April. The bank has taken a more hawkish stance in recent weeks, and if the minutes reflect this then the single currency could climb.

As for the US dollar, the latest initial jobless claims report could cause some movement if it surprises markets.
Otherwise, risk appetite may be the driving factor for USD exchange rates.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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