UK inflation continues at elevated levels

Hi everyone,

 

After a slight wobble in trading yesterday, the Pound is back up to a 20-month high versus the Euro and a fresh 1-month high against the Dollar. UK inflation data this morning confirmed that for the second month in a row, current levels (3.1%) are well above the BoE target of 2% and therefore analysts expect to see a BoE rate rise next month. Economists are predicting inflation to peak in April 2022 at around 5%, so a higher cost of living is here to stay for a good while yet. 

 

As mentioned in the report on Monday, it's unclear whether the Pound can/will gain anymore value when a rate hike is confirmed, as it does look like current levels have already priced this in. So hedging your bets with exchanges would make sense, to bank the current high and gamble on the remainder for the next couple of weeks. A reminder that £-€ rates were trading at 1.0950 this time last year and 1.15 6-months ago. 

 

£-€ rates have been trading around the 1.18 mid-market level for a week now, consolidating its position and possibly looking for more gains to the next resistance level of 1.19. There is certainly scope for a 0.5% movement up, seeing as a huge 3% has been made in the last 3-weeks. There is always a 'but' to these statements though and this time it's covid-19 cases that provides it. Current UK cases suggest another peak is on its way and traders will be paying attention to the tone of Government in the coming weeks. 

 
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