All eyes on inflation as markets tread carefully | Forex Trading Blog | Online Trading Blog

Today, the markets opened to a round of apprehension in the advent of UK Chancellor Rishi Sunak’s forthcoming announcement in which he is set to announce to the public how he intends to combat the cost of living crisis and spiralling inflation which is having an impact on businesses and residential households in Britain.

Official figures show that inflation is currently at around the 6.2% mark, which is the highest for three decades, and the Retail Price Index (RPI) has reached incredible highs of 8.2%.

Rishi Sunak’s impending delivery of the Spring Statement is now a focus for investors, analysts and businesses, and is equally important to retail consumers and private households as Britain’s economy remains under huge pressures following the two years of lockdowns and now a cost of living crisis.

Interestingly, the British Pound has been making a remarkable resurgence against the US Dollar, despite its low performance during the early part of this month.

In Mid-March, the GBPUSD pair was trading at 1.30, and now its up to 1.32. Whilst that appears to be a small gain in monetary terms, it is a strong resurgence given that the US Dollar was at a 1.5 year low against the Pound in early March, and that these staple major currency pairs are notoriously non-volatile.

It is worth considering how the British Pound has made that gain against the US Dollar at a time during which there is a cautious approach toward the markets by British consumers and traders and that the metrics concerning inflation, energy price rises – which are an indicator of very high commodities values at the moment.

Mainly, it is due to the United States facing a similarly increasing level of inflation, which officially is even higher than that of the United Kingdom. Currently, inflation in the United States stands at 7.87% according to official government figures, which is the highest in 40 years and has spurred speculation that it may head for double figures.

Chancellor Rishi Sunak is therefore very much in the spotlight today, and is set to announce extra financial support for households already facing a severe cost-of-living crisis when he delivers his Spring Statement at lunchtime.

Whether he will skirt past advice given to him by senior Conservative government officials not to raise national insurance contributions for employers and employees in order to put some money back into the coffers is yet to be seen. Rishi Sunak has already hinted that he will not be going back on what is being viewed as a ‘tax raid’ which may cause the average family to be some £1,800 per year worse off at a time during which every penny counts.

Blue chip stock appears to be of very little concern, however. The FTSE 100 index on the London Stock Exchange this morning is up to 7,511.62, which is a 3% increase over the past five days. This demonstrates that the investing community has faith in London’s most prestigious listed companies.

The supply of raw materials and the ensuing increase in energy costs has been a bugbear for industry, and sanctions on Russia, one of the world’s most important energy producing nations, have been crippling however corporate needs have surpassed the trend for imposition of sanctions and France’s president Emmanuel Macron has instructed Renault to resume its production in Russia at the Moscow assembly plant.

Perhaps this may lead to others easing their sanctions, and toward taking a business-orientated view going forward.

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