Overnight, GBP/USD weakened to its lowest level since November 2023. Against the euro, on Wednesday sterling fell to its lowest level for more than a week, from what had been a five-week high, and has been struggling to recover ever since.
The markets have been trying to square the relatively disappointing fall in inflation announced on Wednesday – which boosted sterling – with the governor of the Bank of England’s dovish comments since then. Andrew Bailey said that Wednesday’s inflation data, showing only a small drop in annual inflation to 3.2%, had been predicted by his own analysts and he was confident that next month would show a more significant drop.
There was an absence of data in the UK and Europe yesterday, which explains sterling’s lack of movement, but there was divergent news on prices.
In the UK, car insurance prices have finally begun to fall, dropping around 5% in the past three months to an average of £941 (although still an eye-watering 43% higher than a year ago). And if you were thinking of driving out for a coffee or hot chocolate, bad news, the prices of those two commodities hit a new record (nearly £9,500 for a ton of chocolate and coffee hitting $4,292 per ton).
This morning we have had news on retail sales for the UK in March, which showed no growth, as shoppers reduced spending on groceries. This had not been predicted by economists, who had forecast growth of 0.3%, and is the second month of volumes being flat.
With the battle to control inflation, the UK looks likely to delay, for the fifth time, bringing in new post-Brexit border checks on incoming EU goods on 30th April, amid worries that if implemented they would cause long delays. The government department responsible said: “There is a potential for significant disruption on day one if all commodity codes are turned on at once.”
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