Sterling ended the day very close to where it started yesterday, having weakened severely in early trading after the UK’s inflation figures for June came in marginally lower than expected.
Against the US dollar the day saw a gradual decline in the strength of sterling, although it remains around 0.7% higher than where its started the week.
Yesterday’s inflation figures showed a 0.8% rise in June and a 9.4% rise over the past year. They were slightly below market expectations, which, while positive news for the country at large – unlike Tuesday’s earnings data which was shown to be growing considerably below inflation – was viewed by the markets as lowering the chance of more rapid interest rate rises and hence sterling weakened as a result.
With the ECB’s interest rate decision today, there are suggestions that they may go beyond the 25 basis point increase already promised to increase rates by 50 points in an effort to tame inflation currently running at 8.6%.
In political news, the final two standing in the Conservative Party leadership election are Liz Truss and Rishi Sunak. One of these will be prime minister on 5th September. Truss is promising an immediate mini-Budget if she wins, to introduce tax decreases.
In Italy, Prime Minister Mario Draghi looks likely to resign after his coalition government fell apart. The former head of the European Central Bank (ECB) has been seen as a political and economic heavyweight in a time of growing crisis for Europe’s third-largest economy.
Also of enormous interest is the reopening of the Nord Stream gas pipeline this morning, following ten days of closure for maintenance. However it is only at 40%.
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