Inflation data gives the pound a boost (Daniel Johnson)

CPI data increases the chances of a rate hike from the BOE

GBP/EUR now sits above 1.11, the best levels of exchange for over a month for euro buyers.  The catalyst for the rise in the pound was Consumer Price Index (CPI) data. CPI is a measure of inflation, if provides a comparison in price changes on goods and services. Inflation is a major concern for the UK and is a direct result of Brexit. The uncertainty surrounding Brexit has weakened the pound considerably. Pre-referendum announcement GBP/EUR sat at 1.42.

With imports now becoming far more expensive businesses are raising prices to consumers. In order for consumers to continue spending average wage growth needs to be increasing at a similar pace to inflation, at present it is not, currently sitting at 1.8%. New wage data is released this morning at 9.30.

Inflation showed an increase yesterday above expectations to 2.9%. The pound benefited as a result. This is due to rumours the Bank of England could consider a rate hike if inflation continues to rise. I am of the opinion a change in monetary policy is not the solution. In order for inflation to fall we need a stable government and clarity over the big issues in Brexit, namely trade and the freedom of movement of people.

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