Inflation in the UK surged to 4.4% in July, the highest in a decade, and looks like it will head higher. Rises in fuel and food prices as well as ‘disappointing price cuts in the summer sales’ contributed to 0.6% upwards move from the previous figure. The last Quarterly Inflation report from the Bank of England put the probability of CPI reaching this level at less than 10%; they’ll be able to take another run at it today.

We expect the Bank of England will predict CPI to move closer to or possibly over the 5% barrier by the end of the year. They’ll be confident however that the slowdown the economy is suffering will push prices lower organically and as such any indications of rate movements will be limited to cuts but not until Q1 of 2009.

Other than the Bank of England Inflation report we have important data also out of the EU today. Industrial production is expected to have fallen across the continent and given the recent slew of poor European data we could see the single currency weaken further.

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 Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.   

Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.