Currency Note

Britain’s inflation hits 41-year high

By Alex Bennett November 16th, 2022

Britain's annual inflation rate remains close to a 40-year high.

Britain’s annual inflation rate rose to the highest it has been since October 1981. The data released by the ONS this morning revealed that inflation jumped to 11.1%, from 10.1% in September. The inflation rate is much higher than markets were expecting (10.7%).

This is against the backdrop of higher taxes and a squeeze on public spending expected in the chancellor’s Autumn Statement tomorrow.

Jeremy Hunt is set to return to orthodox economics, with plans aimed at filling the hole in public finances, as well as tackling the current cost of living crisis.

Rishi Sunak said that, “the number one challenge we face is inflation.” He also added that the UK is “not alone in that” as “Germany and Italy have inflation that is even higher than ours at the moment.”

Yesterday evening, missiles landed in Poland near its border with Ukraine. Two citizens were killed and Poland convened emergency talks with its NATO allies.

President Joe Biden called an emergency meeting of G7 and NATO leaders early this morning.

Dollar-watchers can expect several interesting data releases today however the key one to watch will be retail sales at 2:30pm UK time.

Later this evening, US economist and member of the Federal Reserve’s Board of Governors, Christopher Waller will speak on inflation.

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GBP: bleak economic forecasts expected

Sterling is on standby as the details for tomorrow’s long-awaited Autumn Statement are being finalised. Jeremy Hunt’s proposals are set to include an increase in the national living wage (to £10.40) and a 10.1% rise in pensions  (in line with inflation).

The economic forecasts that will be published alongside the chancellor’s Autumn Statement are expected to be bleak, as Hunt acknowledges soaring inflation is unleashing a recession.

GBP/USD over the past year

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EUR: Germany’s economic outlook improves

Market watchers saw Germany’s economic outlook improve yesterday in the latest economic sentiment data. The ZEW Indicator of Economic Sentiment rose sharply by 22.5 points to -36.7 in yesterday’s data release, which was the highest since June. It was also above market expectations of -50.0.

USD: return of the retail sales data

Today’s retail sales report will give markets an insight into sales of retail goods and services for October.

In September, retail trade was unchanged and missed market expectations of a 0.2 percent increase. This was mainly due to high inflation and rising borrowing costs which hit consumer demand.

Markets are expecting today’s figures to come in at 0.9%

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