Inflation on the march in Britain

Consumer price inflation in the United Kingdom ticked up to 2.9% in July, piling more pressure on businesses and consumers beginning to feel the squeeze from the protracted energy crisis.

The Office for National Statistics (ONS) said the impact of higher oil and gas prices drove the increase from June’s 2.6% read. The price of alcohol, tobacco, furniture and clothing was also up month-on-month, although there was a surprising slowdown in food cost inflation. Sterling was seen slightly lower against the US dollar immediately after this morning’s news.

Tuesday was a broadly settled day for major currency pairs. Despite some fresh data to consider, the pound ranged by a mere fraction of a cent against both the US dollar and the euro. Even the Japanese yen, which recently came under such pressure the American government had to intervene to stop the crisis spreading, moved by less than 0.2% on average.

Things weren’t so settled in the Middle East, where yet more political grandstanding sent oil prices to their highest this month. Iran launched more military strikes on ships in the Strait of Hormuz, while President Trump sent a post to his Truth Social network labelling the region the new ‘US territory’.

All this led to a jumpy mood in wider markets. Concerns that the conflict with Iran would drag on for months have sent government borrowing costs higher in recent days. That trend continued on Tuesday, with UK and US bond yields (i.e. the price a government must pay to borrow) coming under particular pressure before a slight pullback overnight.

Global equities endured another bruising day yesterday, as concerns about the sustainability of the AI gold rush fed into these broader anxieties. Chipmakers were down across indexes in Asia and the United States, with the Middle East conflict and the inflation appetite sending investors into a risk-off posture.