In the last month the British pound has performed the second worst of all the major currencies beaten only by the Swedish krona. The British pound is down 2.04% against the US dollar, 2% on the Swiss franc and 0.2% on the euro. With the outbreak of war and the sanctions that follow we are expecting to see a rapidly reduced number of interest rate hikes this year by the Bank of England and into 2023. The fall in the price of the pound is expected as it does tend to perform best when rate hikes are on the horizon. So, on the flip side it will likely under-perform when the possibility of rate hikes diminish.
The UK finds itself is a tricky situation when it comes to inflation. Markets are predicting inflation getting up to 8% in April, up 0.3% from last months forecast due to the conflict in Europe. Oli and gas prices are on the rise over ($100 a barrel) with the knock-on effect of petrol prices in the UK with the average price of unleaded petrol jumping to 151.25p yesterday. The price of oil affects the vast majority of the supply chain of which costs will be passed onto consumers with increased prices. The Bank of England use interest rate hikes as a tool to manage inflation, a global conflict makes the decision to hike rates much trickier.
There is limited economic news today with the ongoing conflict in Ukraine set to dominate the headlines for the rest of the week.
Have a good day.
Josh Saunders, Senior Relationship Manager.
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