020 7898 0500The main release of yesterday was the UK inflation figure for April which unexpectedly fell to 2.4%. It is the lowest figure for more than a year and raises some serious questions regarding whether or not the BoE will increase interest rates in August. The markets clearly don’t think it likely at the moment, as sterling continued its recent weakness against the dollar and fell to a five-month low in the immediate aftermath of the release.
The Office for National Statistics attributed much of the fall in inflation to lower airfares which should please the British public. It will also ease the cost of living burden for UK households, although the resultant volatility in sterling should concern UK businesses who have not managed their currency risk. Recent currency movements highlight the need to put currency risk management strategies in place and this period of volatility is set to continue if further evidence of a weak UK economy is forthcoming.
Today we will see retail sales for April which are expected to have picked up month-over-month. The next major release this week comes on Friday, when we will see the second estimate of the GDP growth rate for the first quarter of 2018. Year-on-year, it is expected to be revised downwards from 1.4% to 1.2%. This could cause further sterling weakness.
