This morning’s inflation figure has sent the pound to a new low for the month against the euro and its lowest against the US dollar since May.
The UK’s inflation figure has just come in at 6.7%, slightly lower than last month but significantly lower than expectations that it would rise due to petrol prices resurging. Moreover, background inflation data was also positive, with core inflation down to 6.2% and producer prices (the prices of goods leaving factories) dropping by 0.4% in the past month.
The impact on exchange rates has been dramatic, with sterling falling across the board, due to the possibility that this means the Bank of England (BoE) may not raise interest rates after all tomorrow.
In terms of global exchange rates, the decision of the US Federal Reserve (“The Fed”) this afternoon is also likely to have ramifications, but more so for the commentary in the press conference afterwards, where we may get some indication as to whether this is the last rate hike for a while.
In the US yesterday there was very mixed news on property, with a large increase in building permits being issued (1.54 million in August 2023 being 100,000 more than expected), but a 160,000 fewer housing starts that in July, an 11% year-on-year drop.
In business and political news, prime minister Rishi Sunak is reported to be ready to water down or delay some of the green policies, or as Downing Street put it, be “pragmatic and ensure costs are not passed on to hard-working families”. Mainly this seems to involve delaying the ban on new petrol car sales and new gas boilers until 2035.
One cost still rising fast is HS2, which is likely to cost £91bn rather than £70bn, according to the FT this morning.
