The latest UK Consumer Price Index (CPI) data will be released tomorrow morning at 9:30am. CPI is an indication of inflation and there is expected to be a slight increase of 0.1% taking the level to 2.7%. Last month’s inflation announcement saw the level unexpectedly drop from 2.9% to 2.6% which surprised markets and caused a headache for Sterling as it makes a UK interest rate rise less likely in the near future. Currently one of the only pieces of good news for the Pound could come from talk of an interest rate hike from the Bank of England.
If inflation was to continue to rise then there would be more optimism of an interest rate hike, which in turn would help Sterling to find some support.
The GBP/EUR rate is currently at a near 9 year low, the last time the rate reached this level was just after the 2008 financial crisis. Tomorrow’s data could help support a movement back into the 1.11’s against the Euro, however whilst I’m optimistic, there is every chance there could be more of the same negative downtrend.
Pound Sterling will continue to struggle until the UK Government get their act together and provide a little more clarity on Brexit plans. Once all the MP’s and the Cabinet are back from the summer break we may start to find out more news.
Theresa May will no doubt find herself under pressure once more, and in the near future we could see a power race start to emerge amongst Conservatives. It would be difficult to judge at the moment if Theresa May lost power what sort of effect that might have, obviously initially the uncertainty wouldn’t help the Pound. Alternatively, if she was replaced by a leader who wants to chase a softer Brexit then the UK markets could gain as the threat of leaving the single market becomes less likely.