Core inflation also rose to 7.1%, reaching new highs despite the continuous tightening measures implemented by the central bank. Although UK Retail Sa
Core inflation also rose to 7.1%, reaching new highs despite the continuous tightening measures implemented by the central bank. Although UK Retail Sales exceeded expectations with a monthly expansion of 0.3%, the annualized figure contracted by 2.1%, exceeding the predicted contraction of 2.6%. BoE Governor Andrew Bailey has hinted at the possibility of further interest rate hikes as the journey towards achieving price stability is far from complete.
However, additional rate hikes by the BoE may have adverse effects on the economic outlook. The persistent UK inflation is dampening the image of the Conservative Party, resulting in a rollback of promised tax cuts to mitigate inflationary pressures and support the central bank’s efforts. UK Finance Minister Jeremy Hunt is engaging in discussions with industry regulators, emphasizing the importance of businesses not exploiting upbeat demand by raising profit margins, a phenomenon referred to as “greedflation.” The broader market sentiment reflects a risk-averse theme, with global equities showing lofty valuations and the upcoming quarterly earnings season approaching. Meanwhile, the US Dollar Index is rebounding following a corrective move, as the Federal Reserve (Fed) is widely expected to announce an interest rate hike in July. Analysts at Rabobank anticipate a more moderate pace of rate hikes, potentially skipping September and considering a second hike in November. Investors will closely
monitor the release of United States Durable Goods Orders data scheduled for Tuesday at 12:30 GMT.
www.fxleaders.com