- UK inflation rose to 1% YOY for month of September
- Weaker Pound likely the cause
- Sterling rallies at week high
Sterling found temporary support following stronger than expected Consumer Price data. For the month of September YOY inflation boasted a healthy 1% which is due in most part to the falling Pound following the Brexit vote, up .2% from its .8% expectations.
Sterling rallied after the news and hit fresh weekly highs of 1.11542 against the Euro, and at the time of writing is continuing its uptrend.
Those looking to sell Sterling should make the most of today’s market movements as further falls to Sterling could occur for the remainder of the week.
Temporary growth but long term implications for Sterling
This morning’s release provides temporary solutions to the UK economy but raises questions longer term if the Pound remains on the weaker side. The UK is a net importer and therefore a weaker Sterling will have implications unless post-Brexit resolution can be found.
These are similar words echoed by Bank of England’s Ben Broadbent, who this week called the fall in Sterling’s value ‘a shock absorber for the economy’. Whilst this explains the strong construction and manufacturing PMI’s, it does not solve the problem of Brexit uncertainty amongst businesses which will eventually trickle into the economy.
Sterling continues to be driven by political concerns
It remains difficult to predict what will happen next for Pound Sterling as most of its movements are being driven by Brexit updates. As noted when Theresa May outlined deadlines for Article 50 and when Parliament were debating the subject, Sterling lost significant ground against its counterparts.
But given that Article 50 is yet to be invoked, and Parliament are yet to agree on a Brexit strategy it would be fair to assume further Sterling losses are likely even in the event of strong data. The UK remains vulnerable and Sterling will follow suit.