Sterling gained steadily over the euro on Wednesday after the Office for National Statistics (ONS) announced inflation had climbed to 2.3% in October – its highest level since April. Both the pound and the euro could not stall the US dollar’s advance, which continued to gather pace as developments in Ukraine took a bleaker turn.
The pound’s morning rally carried over into the afternoon against the euro and totalled half a cent by market close. Sterling could not keep that momentum going against the US dollar, which came roaring back in the afternoon to post daily gains over both it and the euro.
After the shock of the inflation data, yesterday provided time to examine the numbers more closely. UK house prices increased by an average of 2.9% in the twelve months to October. For millions of renters, the post-pandemic price hikers continue to hit hard. Rent growth in October came in at 8.7% in the 12 months to October, just below the record of 9.2% set in March 2024. The pace of price rises was even faster in London (10.4%).
If Britain was left licking its wounds in the wake of the inflation data, it could at least find some small comfort in the fact that things might be worse. Take Turkey, for example. Inflation reached a staggering 49% in October, leading president Recep Tayyip Erdoğan to suggest the minimum wage may have to rise in line with this figure to prevent widespread poverty.
Global markets were once again looking to Ukraine with unease. Yesterday, the Ukrainian military fired British-made missiles into Russian soil for the first time. Meanwhile, the US, Italy, Greece and Spain all shut their embassies in Kiev after reports of a major Russian air strike on the capital.
Currency markets viewed these developments and fled to traditional safe-haven currencies, the exact dynamic that had been so conspicuously absent on Tuesday. Stock markets were muted yesterday as the world awaited updates from an increasingly fraught situation.
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