UK Inflation rate Remains Unchanged

By Matthew Vassallo

The Pound has found itself back on the front foot during the early part of the trading week, with GBP receiving a timely boost following yesterday’s better than expected UK employment numbers. The UK’s official unemployment rate fell to 3.8%, down from 4.2% last month and perhaps more poignantly, was lower than the anticipated figure of 4%. With an increase in new jobs and a rise in average earnings, optimism grew, which was evident by the increased risk appetite for Sterling amongst investors.

The increase in average earnings will also lend weight to the argument that the cost-of-living crisis is being tempered, at least to some extent. This school of thought would have been fuelled further following the release of this morning’s UK inflation figures. Whilst the official inflation figures remained static at 4%, it came out lower than the predicted level of 4.2%.

UK Chancellor Jeremy Hunt remained bullish in his interview this morning on Radio 4, during which he said the government’s current plan to lower the dangerously high levels of inflation “was working” and that the official number would fall back to the Bank of England’s (BoE) target level by early summer.

Whilst it may not exactly be the defining political U-Turn that is required to drag the Tories out of their political wilderness, it is certainly been a more positive week for number 10. Perhaps the same cannot be said Keir Starmer’s Labour party, who have been caught up in relative turmoil this week following the suspension of two of its parliamentary candidates. News reports this week have been centred on comments made by the now former Labour candidate MP Mr Azhar Ali, who was until recent days, the bookies’ favourite to win the upcoming Rochdale by-election. Mr Ali was castigated for anti-semitic remarks he made during a private meeting back in October in relation to Israel. This was clearly unwanted attention that Keir Starmer could have done without as he looks to cement his still sizeable lead in the polls ahead of the next UK General election. This already uncomfortable situation has been further exacerbated following the suspension of a second Labour candidate, Mr Graham Jones, over apparent similar anti-semitic comments.

Whilst the Pound has benefitted this week from stronger than expected economic data, the current political uncertainty and concerns surrounding both of the major parties could lead to a drop in support for the Pound, as investors potentially shy away from GBP as they wait for further developments to unfold.