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UK inflation hits 2 year high, GBP rises as BoE rate cut potentially delayed

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In a very rare sight the market was almost uniformly green this Tuesday morning following the release of the latest UK inflation reading.

The figure came in at a higher than expected, and 2 year peak, of 1.0% across September, sending both the FTSE and pound higher, British consumer be damned! Sterling’s sustained slump, alongside Brent Crude’s recent $50 per barrel-plus performance, have pushed up the CPI reading, while a sharp 6% clothing price increase between August and September also added to the rise.

Despite the squeeze inflation is going to put on consumers (especially after Christmas when retailers will be less afraid of hiking prices) the markets reacted well to the news. The FTSE surged 70 points to re-cross the 7000 mark, while the pound took 0.8% off the dollar and 0.6% off the euro, the currency arguably pleased with the fact the inflation increase may deter the Bank of England from cutting rates in November.

Looking ahead to the afternoon and the focus remains firmly on inflation. The US reading is expected to come in at 0.3% compared to 0.2% last month, something that may boost the rate-hike chasing dollar (and therefore temper the pound’s morning push). The Dow Jones, however, seems to be benefiting from the greenback’s currently weakened state this Tuesday, the futures pointing to a 80 point rise after the bell.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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