The pound has weakened against the euro and the dollar this morning following US inflation data that appears to have slightly surprised markets. As a result, market mood is more cautious and investors appear to be turning to the ‘safe haven’ currency of the dollar.
US PPI revealed that producer prices saw the highest annual rise since November 2010, suggesting that higher inflation may not be as transitory as the Federal Reserve initially thought and could lead to earlier tightening of monetary policy.
Nonetheless, the pound still has the support of clear signs of economic recovery, such as yesterday’s GDP figures which saw the UK economy grow by more than expected in June.
Global risk appetite and the global spread of the Delta variant of Covid-19 could drive the direction of sterling in the coming months.
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