By Ashley Finill
On Wednesday, the UK’s inflation figure was posted and posted higher than expected coming in at 10.1%. It is now a concerning fact that Britain continues to suffer the worst inflation crisis amongst the G7 countries as it has raced to 40-year highs since the start of 2022. Last month economic forecasters predicted that by the end of the year inflation could hit a staggering 13%. This is due to many factors in the cost of living crisis, one of the major increases are energy bills. The price cap being is set to be increased in October by around 70% and again 3 months later in January as Ofgem has decreased the price cap period from 6 months to 3 months. This week an Ofgem board of director quit her job in protest she said she resigned because did not believe that the regulator had “struck the right balance between the interests of consumers and the interests of supplier”. The regulator’s role is to protect consumers but seemingly has been doing the opposite while the energy companies make record profits. Whilst the government are out on recess in these dire times people are looking for some action to be taken, it is a grim outlook on where our economy is, something that the new prime minister come September 5th will need to get hands on with to provide support and reassurance for the the people of the UK.
Leadership race trundles on
We are now just over 2 weeks away from finally seeing who will be revealed as the new Prime Minister in what has been a laborious process. Debates have been held throughout the last few weeks with little interest, the feeling amongst the public is to just get someone in to sort the cost of living crisis which continues to spiral out of control. Each of the candidates have put forward their pledge to get the UK out of trouble, Liz Truss has said that she would use an emergency budget to kickstart her plan to get our economy growing and put more money into the pockets of hardworking people, the previous week a recording had been leaked of the foreign secretary Truss saying that British workers needed “more graft” which is a somewhat contradiction to her pledge to help a “hard working” public. In a recent Sky News poll, Truss is ahead of Rishi Sunak by some margin which is already looking like a one-horse race; the voting is open until the 4th of September where the result will be revealed on the 5th.
Sterling Market Performance
Sterling had been making signs of a recovery over the past couple of weeks against both the Euro and US dollar, however this week’s dire economic outlook for the UK following Wednesday’s inflation release has now seen the Pound slip against the majors. With this record inflation figure there will almost certainly be further action taken by the Bank of England. They have already raised interest rates last month, but it is being reported that the interest rate in the UK is set to be doubled in the next six months to combat the sharp rise in inflation. Staying with the UK economy as retail sales figures were released today at 8.00am and unsurprisingly posting a contraction from last month’s figure, the reading also came in slightly lower than expected which has put sterling on the back foot for Friday trading. GBP/USD has dropped over 3 cents in the past couple of weeks and this morning continues to drop as the Dollar continues to surge against both the Pound and the Euro since the start of the war in Ukraine as it is seen as a safe haven currency. Sterling’s recent demise could be a sign of things to come so if you have a requirement to sell pounds into Euros or Dollars it may be worth contacting your currency consultant to discuss your options as we can limit any losses and get your more currency for your Sterling with our favourable exchange rates.
On a more positive note, it’s Friday and the weekend is ahead of us! … just don’t plan to make any journeys that involves using trains!