Did UK inflation pick up in July?

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Has the inflation rate in the UK increased in the last month?

Soaring oil and gas prices, coupled with rising food prices, are weighing heavily on the UK economy. In June, inflation in the country hit a new 40-year high of 9.4%, above eurozone and US levels.

Inflation data for July will be released on Wednesday, with economists polled by Reuters expecting the consumer price index to have risen 9.7% year on year. UK households are set to face average annual energy bills of over £5,000 next year as Russia’s war in Ukraine adds pressure on oil and gas supplies to Europe.

Earlier this month, the Bank of England warned that inflation in the UK was expected to hit 13% and the country would fall into recession by the end of the year. The bank raised interest rates by 0.5 percentage point to 1.75% as it tries to dampen demand and stem rising inflation.

Vasileios Gkionakis, head of G10 currency strategy at Citi, said UK inflation is “likely to prove more rigid due to Brexit, further complicating [the] BoE policy.

The US consumer price index rose 8.5% year-on-year in July, data showed this week, slowing from the previous month.

“The United States does not have as acute an energy problem as the United Kingdom,” said Lyn Graham-Taylor, senior rate strategist at Rabobank, adding that the Bank of England finds itself having to “sacrifice the economy” by raising interest rates in order to bring runaway inflation back to the 2% target. Nikou Asgari

What will retail sales tell us about the state of the American consumer?

U.S. retail sales figures for July should give market participants a glimpse of consumer confidence at the start of the third quarter – an important data point after two quarters of contraction.

Economists polled by Bloomberg expect the Commerce Department to report a 0.2% increase in overall retail sales in July from the previous month, a slowdown in growth from the 1% increase reported for June.

Some of the difference may be attributable to lower gasoline prices since June, when the average cost of a gallon at the pump peaked at more than $5. The movement between June and July is less marked when car and gasoline prices are removed, although it still shows a slowdown: the Bloomberg poll indicates expectations of a 0.3% increase in July against 0.7% in June.

Bank of America analysts suggest it’s possible that falling gasoline prices – manifested in a slowdown in annual consumer price inflation in July – may have boosted consumer spending in other sectors of the economy. These analysts forecast a 0.9% month-over-month increase in retail sales, without the effects of spending on cars, gasoline, building materials and restaurants.

The data follows a scorching jobs report for July as well as a second consecutive quarter of gross domestic product contraction in the April-June period, the combination of which has provided a somewhat confusing picture of the state of the American consumer.

“Following the second consecutive contraction in real GDP in the second quarter, moderating inflation and durable consumption will inform how the third quarter unfolds in terms of realized growth,” said Ian Lyngen, head of equity strategy. US rates at BMO Capital Markets. Kate Duguid

Has the dollar turned?

The US dollar is on a tear. Aggressive interest rate hikes by the Federal Reserve, aimed at curbing inflation, have helped push the greenback to 20-year highs in recent months. Yet economists are divided on how long the currency will run.

The latest data from the U.S. consumer price index, which investors have been watching closely for how much the Fed will raise borrowing costs, showed signs of stabilizing in July. Stock markets on Wall Street rallied in response, and the dollar index – which measures the greenback against a basket of six other currencies – is down about 3% from its July 14 peak.

“Barring a major upward revision to expected rates or renewed fears of a hard landing,” Societe Generale’s Kit Juckes said on Friday, “the dollar has peaked for good, under Reserve as always of what happens elsewhere.

Others are less sure: More than 70% of currency strategists polled by Reuters in early August believed dollar strength had yet to peak, although a third of respondents said it would within six months. coming months.

ING’s Christopher Turner is among those who believe the dollar will remain strong until the end of the year, arguing that it tends to benefit from high inflation rates, slowing economic growth and “flat/inverted US yield curves like we have today”. the scenario where yields on shorter-dated government bonds are higher than those on longer-dated bonds.

“Not until investors are convinced the Fed is ready to boost, not slow, the US and global economies if the dollar falls,” Turner said. george steer

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