News that the UK’s headline inflation rate unexpectedly held steady at 3.8% was enough to cause an about-face in interest rate forecasts. Economists and investors changed their tune fast – across the course of a few hours, in facts – predicting September’s figure could mark the moment of “peak inflation” in this cycle.
Of course, those predictions are subject to the swings of notoriously fickle currency markets. The Bank of England’s next decision is by no means a sure thing, particularly given it comes so close to the autumn budget. Andrew Bailey and his team may decide they need more evidence of price stability before they can risk another cut.
The pound weakened sharply after the inflation report but recovered almost all its lost value against the US dollar and the euro across the afternoon session. The yield on 30-year UK government debt also fell to its lowest level since early July, making things just a little more comfortable for the chancellor.
The Argentine peso tumbled to a record low yesterday ahead of Sunday’s mid-term elections. Having previously received a $20 billion lifeline from the United States, fears are growing that it will not receive a second cash injection that could stabilise the economy, currently experiencing major strains.
Financial markets and experts alike now expect the Argentine peso to be devalued next week. That would be a bitter blow to President Javier Milei, the self-styled sledgehammer who has sought to bring down inflation and reorganise a chaotic economy.
After a stormy meeting in Washington last weekend, Volodymyr Zelenskyy indicated that he would support freezing current battle lines in a peace deal with Russia. That is a significant change from his former position, although Zelenskyy said he doubted Russia would consider such a proposal.
Shortly after that statement, President Trump announced sanctions on two of Russia’s largest oil producers. The price of brent crude surged by more than 3% overnight and, combined with Tuesday’s jump, means this is the largest two-day jump since July.
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