Home » Stocks and Commodities both coming under pressure, Ethereum rose more than 2%
UK Consumer Price Inflation was 9.9% in August, down from 10.1% in July.
UK Consumer Price Inflation as measured by the change in the Retail Prices Index (RPI) was 9.9% in August, down from 10.1% in July. The main contributions to the fall in the rate came from clothing and footwear, which saw a smaller increase than last month due to the end of summer sales. There were also downward pressures from air and sea fares, which were both lower than a year ago. These were offset by higher food prices and increases in utility bills. The increase in the RPI is still well above the government’s target of 2%, but it is encouraging to see that it is starting to fall. The hope is that this will continue over the coming months as the effects of the pandemic start to ease.
The pace of price increases remains uncomfortably high for the Bank of England amid stubborn core inflation
The pace of price increases in the UK remains uncomfortably high for the Bank of England, as core inflation stubbornly refuses to budge. The BoE’s Monetary Policy Committee voted unanimously to keep interest rates on hold at 0.75% in its September meeting, but signalled that a rate hike could be on the cards in the near future if inflation does not start to fall. The BoE’s main concern is that inflation is being driven by domestic factors, such as wage growth, rather than imported goods. This means that there is little scope for the BoE to use monetary policy to bring inflation back down to its 2% target. With Brexit looming large on the horizon, the BoE will be hoping that prices start to fall soon, or else it may be forced to raise rates and risk further damaging the UK economy.
Pound retreats again to $1.148 amid dollar strength, as steeper interest rate rises are expected in US
The pound has retreated against the dollar for the second day in a row, as investors continue to price in the likelihood of higher interest rates in the United States. The currency is currently trading at $1.148, down from yesterday’s high of $1.152. The slide comes as investors bet that the Federal Reserve will raise rates more aggressively than previously thought, in response to rising inflationary pressure. This is likely to put downward pressure on the pound, as higher rates make the currency less attractive to investors. In addition, concerns about the Brexit negotiations are also weighing on the currency. With less than two weeks to go until a crucial deadline, there appears to be little progress being made towards agreeing a deal. This increasing uncertainty is likely to keep the pound under pressure in the coming days.
Anxiety grips financial markets as worries about the global slowdown and a US recession rise
Anxiety gripped global financial markets on Wednesday as worries about the outlook for the world economy and the possibility of a recession in the United States mounted. The Dow Jones Industrial Average rose 0.25 percent, while in Europe, the STOXX 600 Index tumbled 0.9 percent, with banks and industrial firms among the worst performers. The sell-off was triggered by a sharp decline in US bond yields, which slid to fresh lows after data showed that manufacturing activity in the country contracted for the second month in a row. The yield on the 10-year Treasury note fell below 1.6 percent, its lowest level since 2016, while the yield on the 30-year Treasury bond sank below 2 percent. The decline in bond yields sent shockwaves through global markets, as it raised fears that a recession could be looming. With financial markets on edge, it’s likely that anxiety will continue to grip investors in the days ahead.
Flight away from risky assets continues, but Ether rises 2% ahead of much hyped ‘Merge’ event
The flight away from risky assets continued today, with stocks and commodities both coming under pressure. However, there was one notable exception to this trend: Ether, the native cryptocurrency of the Ethereum network, rose more than 2%. The rally came ahead of a much-hyped event called the ‘Merge’, which is scheduled to take place tomorrow. Under the proposed changes, Ethereum will become a proof-of-stake network, meaning that users will be able to earn rewards for staking their ETH. This has led to increased demand for ETH in recent weeks, as investors position themselves ahead of the event. However, it remains to be seen whether the ‘Merge’ will live up to the hype. Prices could come under pressure if it fails to deliver on its promise.