Yesterday’s inflation data led to the pound losing against just about every other currency. However, the losses were not enormous – around a quarter per cent against the euro, yen and Canadian and Australian dollars, and half a per cent against the US dollar and yuan.
The reason for the fall was the notion that inflation falling to 6.7% (when a small rise was expected) allows the possibility that the Bank of England (BoE) may not, after all, raise interest rates at its meeting at lunchtime today. A 25 basis point rise is now believed to be roughly a 50/50 possibility, along with no rise.
In the US yesterday the Federal Reserve opted to hold its own headline interest rate steady at 5.5%. Its rate-setting committee, the FOMC, did however, indicate that there could be more rises to come in 2023 and probably fewer decreases next year than hitherto assumed.
The result was positive for the dollar, albeit with fairly modest rises of 0.10% to 0.40% against major rivals. Two-year US Treasury yields hit a 17-year high on the news, while stocks fell.
So far this morning we have had news on government finances in the UK with Public Sector Net Borrowing which came in slightly higher than expectations at £10.765bn in August.
In business news there was really only one story yesterday. British prime minister Rishi Sunak announced a delay on certain green policies, including that sales of petrol cars and gas boilers will now be allowed for a further five years, to 2035. He insisted that the UK could still reach net zero by 2050, and it was seen as a gamble to open a dividing line with the Labour Party as we approach an election year. It could even suggest an early election.
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