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Rapid Rise in Inflation causing problems for Sterling (Daniel Johnson)

Rapid Rise in Inflation causing problems for Sterling (Daniel Johnson)
May 17
07:42 2017

Inflation data weakens Sterling

Yesterday saw the release of Consumer Price Index (CPI) data. CPI is a measure of inflation and yesterday we saw a rise from 2.3% to 2.7% month on month. Usually a rise in inflation is deemed as good for an economy, but on this occasion it is a worrying sign. The rapid rise is a direct result of the vote to leave the EU. Sterling has weakened considerably against the majority of major currencies since the vote and a result imported goods have become far more expensive. With retailers now facing higher costs they are filtering the increase on price down to the consumer. This can be sustainable provided wage growth is increasing at a similar rate. On this occasion, it is not, in fact it is some way behind which is why we have seen Sterling weaken so significantly. If you have a currency requirement involving Sterling be sure to keep a close eye on CPI data it could have a big impact on GBP value.

How will the UK election effect the pound?

Usually a snap election would could cause the currency in question to weaken, but on this occasion the opposite occurred. It is a shrewd move from the PM to call for an election while the opposition is so weak. A conservative victory is deemed as positive for the UK economy and is the reason Sterling has strengthened as of late. Some may expect heavy volatility as the election draws closer, but I am of the opinion a conservative victory is already factored in, if they do win I would not expect big movement on the exchange.

If you have a currency requirement I would be happy to assist. If you let me know the details of your trade I will endeavour to provide a trading strategy to suit your needs. I can be contacted at dcj@currencies.co.uk. Thank you for reading.

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Daniel Johnson

Daniel Johnson

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