Inflation has surprisingly climbed higher than initial forecasts, with an increase in household bills being the main contribution to inflation rising to 3.5%. It’s also notably the highest level of inflation since January 2024, bringing more bad news to Labour bearing in mind inflation was at 2.2% when they were elected.
The most worrying part of inflation rising was services, which has risen from 4.7% to 5.3% again notably up from the Bank of England’s target of 5%. One spot of hope, however, is that with Easter having fell in April as opposed to March, the yearly increase in air-travel will have added to the inflated figures. Whether we see this replicated with a lower May figure released next month will be key.
Off the back of this inflation release, analysts are now suggesting this damages the possibility of another rate cut by the Bank of England next month. Crucially however, markets are still fully pricing in two interest rate cuts this year as expected, but the chance of an interest rate cut next month now stands at a meagre 10%.
Pound Sterling has also reached a 3 year high against The Dollar this morning, with U.S sentiment towards the health of the economy taking a hit. American stocks alongside the US Dollar have both taken hits this morning, suggesting investors globally are moving out of their US assets and looking for alternatives. This is also shown with EUR/USD now markedly back above 1.13.
Recent comments made by influential Fed Officials clearly point towards concerns internally surrounding the future of the US economy as a result of Trump’s trade policies implemented over the past few months.
GBP/EUR 1.1831 GBP/USD 1.3389 GBP/AED 4.9209
GBP/AUD 2.0804 GBP/CHF 1.1059 GBP/CAD 1.8610
GBP/NZD 2.2602 EUR/USD 1.1306 GBP/ZAR 24.0222