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You are here: Home / British Sterling / UK inflation hits a 20 month high

UK inflation hits a 20 month high

August 16, 2016 by Rob Lloyd

UK inflation hits a 20 month high
  • Consumer price shows modest growth of 0.6%
  • UK inflation could move towards its 2% target
  • Limited impact on Pound Sterling

Positive economic data for the UK post-Brexit

Pound Sterling paper planeThe positive data this morning came as no surprise, a weaker Sterling is causing businesses to pass import prices onto consumers. Given that wage prices have remained, and probably will remain stagnant for some time. Consumers are likely to bare the brunt of a post-Brexit environment.

Some have predicted that inflation could return to its 2% target as we approach the end of the year.

The news had little impact on Sterling, in the early hours of this morning GBPEUR exchange rates fell into the 1.14 territory before rebounding to 1.15 on the release. It would appear at this stage very little is helping the Pound whilst the uncertainty continues.

Brexit delay main driver of weakness

Sterling continues its downward trend as we approach the latter part of this year, Theresa May has made clear that she does not intend to official divorce from the EU until at least 2017. This leaves Pound Sterling open to further weakness in the mean time, with economic releases likely to be the driver behind major slumps. With very limited data for the remainder of the week, it is plausible that Sterling to Euro rates could fall to mid 1.14 ranges.

Looking ahead at Sterling

I personally see further losses for Sterling in the short term, with rebounds likely in September or October. Markets are waiting to understand how the economy is performing during this period of limbo, with an official withdrawal from the EU not likely until 2019 or beyond.

Article 50 will likely bring further uncertainty, putting pressure on Sterling in the mid-term. The future of the UK’s economy and more specifically Sterling, will depend entirely on what deals the UK gets from either the EU or further afield.

I would there suggest anyone looking to buy foreign currency with Sterling, consider that current rates could get significantly worse in the weeks ahead. Making a transfer now could save you from these losses.

Filed Under: British Sterling Tagged With: Brexit, Inflation, Pound Sterling weakness

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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