The British pound has hit its lowest level in almost a year after a round of disappointing numbers all but killed the chances for a rate hike from the Bank of England next month.
CPI figures released earlier today came in at 2.4 percent against expectations for a figure of 2.6 percent, continuing its downtrend and relieving some of the pressure on the BOE to hike rates in August.
The Central bank has consistently mentioned 3 things that will help them decide to tighten monetary policy as the year unfolds which are higher inflation, a smooth transition of the Brexit process as well as higher wage growth figures.
Its seems at the moment that none of the above is going to plan with British Prime Minister Theresa May narrowly wining a vote yesterday in parliament to keep her Brexit process on track, but she is not out of the woods yet as another vote is due next week which may be defeated in the house of commons and throw the UK into a period of political instability.
Wage growth in the UK is also at the lower end of the scale and with oil price expected to fall as the year unfolds we may not see any rate hike at all from the BOE this year which will hit the pound hard as at least one hike is priced into the currency.
"If we are right in thinking that oil prices will fall back later this year, then input price inflation is unlikely to remain this high for long. And CPI inflation looks set to resume its downwards later this year, as the inflationary impact of sterling’s fall continues to fade. On the face of it, then, the figures perhaps reduce the chances of a rate hike in August," says Ruth Gregory, a senior UK economist at Capital Economics.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
IMPORTANT: Please be informed, that our services are available for Professional Clients only.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|