Inflation, inflation, inflation

By Lauren Buckner

The Pound performed soundly last week against both the Euro and the US Dollar as we saw positive unemployment and wage growth data. However, all eyes are on this Wednesday’s UK inflation release to signal the next move for the Pound.

Current predictions are for UK inflation to be released at 8.2pc year on year for June, a steady decline from the previous 8.7pc as lower fuel prices continue to filter through to UK consumers however, you would be hard pressed to find someone who isn’t exasperated by the continued increase in food prices at the moment which is putting pressure on household budgets. A key area of spending for us all.

As inflation in the UK has continued to dictate the Bank of England’s policy stance of interest rate rises, all eyes are on this weeks data to share some insight in to the Bank’s next move at their early August meeting. High inflation has driven up the value of the Pound as interest rates rise to contain this price growth and make the Pound more attractive to investors, therefore increasing demand – providing positive momentum for our clients moving Sterling!

With interest rates currently at 5pc (the highest level for 15 years) there is a growing fear that further rises in the rate of interest could become counter-productive for the UK economy and push UK GDP towards contraction and therefore recession in the UK. This means that Wednesday’s CPI release is key to the direction of the Pound moving forward and troubling to predict the currency markets’ response, uncertainty is increasing which drives volatility in currency markets.

Central bank policy has been key to currency market movements through 2023. The US Dollar last week fell to 15 month lows against the Pound with U.S. CPI being released at 3pc suggesting that the cycle of interest rate rises in the US is about to end and allowing the Pound to capitalise. However, there was less success against the Euro for Sterling which is still consolidating below year highs so far in GBPEUR due to forecasts of two or more further interest rate rises to come from the European Central Bank between now and year end.

Regardless of how the data is released (higher or lower inflation in the UK) the impact on the Pound’s value is uncertain and therefore reducing the risk of a change in exchange rates should not be overlooked, regardless of whether you need to buy or sell the Pound! Please make contact with your account manager today to discuss your specific options.

Data releases this week


US retail sales (Jun)

US industrial production (Jun)

AUS inflation rate (YoY)


UK core inflation rate (YoY)

EU core inflation rate (YoY)


AUS unemployment rate

US initial jobless claims

US Philadelphia Fed manufacturing index

EU flash consumer confidence

EU existing home sales (MoM)


UK consumer confidence

UK retail sales (YoY)

UK public sector net borrowing (Jun)

China core inflation rate (YoY)