Sterling fell hard today down -0.83% to $1.2856 in part-response to July’s headline UK consumer price inflation figure of 2.6%. No change on June.
The Office of National Statistics said on-going pressure on petrol and diesel prices was a major contributor though there is on-going energy price pressure at the edges. The euro was down on the dollar at $1.1712, a -0.55% slip while the dollar rose close to 1% against the yen.
The dollar was buoyed also by stronger US retail sales, up 0.6% month-on-month in July. The biggest increase since December.
New car sales and internet-based consumer goods saw robust rises. Significantly the US rise went against most expert estimates who had pencilled in, for the most part, a climb of closer to 0.3%.
Back in the UK the FTSE 100 ended 30 points higher at 7,383, up 30 points with easyJet and IAG the biggest climbers, up 4.35% and 2.69%. Provident Financial shares fell more than 3%.
- UK FTSE 100 7,383 +0.41%
- Dow 21,992.44 -0.02%
- S&P 500 2,464.42 -0.05%
- Nasdaq 6,334.01 -0.10%
- Nikkei 225 19,573.31 +1.11%
- DAX 12,178.18 +0.07%
- CAC 40 5,141.41 +0.34%
- Gold 1,276.50 -1.08%
- Oil WTI 47.25 -0.69%
UK inflation under control?
Some economists appear to think that UK inflation is now under control. “It now looks quite possible inflation has peaked, and will fall back further incoming months,” Ben Brettell, senior economist at Hargreaves Lansdown.
“The year-on-year increase in producers’ raw material costs fell to 6.5% in July – undershooting forecasts for a 7.0% rise. This was down from 10% in June, the biggest month-to-month slowdown in almost five years. “
It’s also good news for borrowers – moderating inflation means less pressure on the Bank of England to consider raising interest rates Brettell said, “and will allow the MPC to remove the sticking plaster of ultra-low interest rates very slowly indeed.
With only two of the eight members voting for higher rates earlier this month, it seems even a return to 0.5% is some way off for now, he added.
Rail price frustration
The new ONS data also means UK rail prices will climb by 3.6% (latest RPI figure) from next January – the biggest price ticket hike for five years. The new fare hikes will apply to around 40% of UK train fares.
Given stagnant UK wage growth many have argued that the train price ticket rise should be attached to the consumer price index figure at 2.6%, not the considerably pricier 3.6% RPI. In the medium term, UK wage growth – a miserable 1.8% currently – is not expected to lift meaningfully.
Oil prices turn south
Elsewhere oil prices came under pressure with Brent crude down -0.85%, coming close to $50 a barrel ($50.3). The oil slip was attributed to non-OPEC supply, namely Libya and Nigeria, plus worry about the Chinese economy.
Meanwhile new US Energy Information Administration (EIA) data suggests that US shale output may climb by 117,000 barrels a day in September.
Breaking news: The IMF has warned on China's rising debt levels. "International experience suggests that China's current credit trajectory is dangerous with increasing risks of a disruptive adjustment," it says in a new report.