UK inflation hits double digits for the first time in four decades

GBP

Last week saw UK inflation hit double digits for the first time in forty years with a projection of 13.3% inflation for the end of 2022. UK consumer confidence remains at all times low and energy prices continue to surge further applying pressure on the Bank of England. The markets are pricing in a 50 basis points interest rate hike next month with indication of a further 100 basis points by the end of the year. The likelihood of a recession in the UK seems inevitable.

UK Retail Sales volume rose by 0.3% in July following a fall of 0.2% in June. Sales were down 3.4% on the year as all signs point towards continued rising inflation.

GBP/USD and GBP/EUR pairs also came under pressure last week with GBP/USD trading at six-week lows after the US Federal Reserve’s hawkish commentary. St Louis Fed President James Bullard stated being in favour of further rate hikes and would prefer a 75 basis points hike in September.

USD

The dollar gained on the safe-haven flow and continues to benefit greatly from the pressure the UK economy and the Eurozone are facing combating the energy crisis.