Trade in the Pound was mixed yesterday, after data showed that UK inflation soared to a new 40-year high in July.
This slump in GBP exchange rates was partly down to risk aversion, but was also driven by fears that the war will exacerbate the UK’s cost-of-living crisis.
Analysts warned the sharp rise in oil and gas prices are likely to stoke inflationary pressures within the UK, and that inflation will likely surge above the Bank of England (BoE) previous forecasts.
BoE policymaker Silvana Tenreyro suggested this could further undermine consumer spending this year as she warned:
‘Recent developments will intensify the terms of trade shock that we were already experiencing, so will push up inflation and have a negative impact on activity.’
Elsewhere an upwardly revised manufacturing PMI lent some modest support to the Pound in the first half of the week, but this was offset in the latter half of the session by the UK’s services PMI as February’s finalised index printed below preliminary estimates.
Looking ahead, the pound is likely to remain suppressed by the situation in Ukraine this week as it continues to sap market risk appetite.
Sterling sentiment may also be undermined by the publication of the UK’s latest GDP figures on Friday as January’s release is expected to report economic growth stalled at the start of the year, in spite of the lifting of more Covid restrictions.
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)