Infalation could cause Sterling weakness (Daniel Johnson)

Rapid Rise in Inflation could hinder Sterling

UK Inflation data was released yesterday. Inflation is rising, usually this would be deemed as positive for the UK economy but in this case it is concerning. The rise in inflation has been caused by Sterling weakness. Retailers are paying more for their imported goods and are now shifting the increase in price on to consumers. Average wage growth is not keeping up with inflation so this could warrant consumers to stop spending. I stated this could be a problem in previous articles, keep an eye on inflation levels moving forward as this could be a major stumbling block for the pound.

UK Election, How will it effect the pound?

We have seen Sterling make considerable gains against the majority of major currency pairings recently. One of the main catalysts was the PM’s announcement that an election is to be held on 8th June. Historically a snap election has weakened the currency in question, however on this occasion we saw Sterling strengthen. It was a shrewd move from May to call for an election while the opposition is so weak. The conservatives are some way in front in the polls and are highly likely to win the election. A conservative victory is considered to be positive for the UK economy and this caused a boost in investor confidence and in turn Sterling. The market moves on rumour as well as fact and I am of the opinion a conservative victory is already factored into current buoyancy level.

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