While unemployment is down in the UK and at a level not seen in 42 years, average wages aren’t doing so hot when matched up against inflation. That is a problem for workers in the UK that are trying to find affordable living in the country’s economic climate.
The pound has also been sold off as of late, and this is a result stemming from the news about inflation outpacing wages. Any news like that is going to impact the market, and the economics behind the message is very clear.
Since there is an election taking place, the normal approach of raising the interest rates is out of the question. That means the Bank of England isn’t going to be helping the pound right now.
The exchange rate was right below 1.20 for pound to euro before the news was released. Of course the sell off after the announcement has continued, without the usual fix. What exactly has that meant for the pound to euro rate? It has been as low as 1.1603.
An interest rate hike was voted on by the Monetary Policy Committee, but as was mentioned earlier, it’s not going to happen with an upcoming election. There was only one person on the committee who voted in favour of raising interest rates, so that was certainly a vote down on the proposal, keeping those interest rates on hold. The cost of living in the UK is something consumers are taking a hit on, too, and that is all thanks to inflation in response to the US dollar’s strength.
The Retail Sales number for the UK could influence the pound either way. The expectations are at 2 percent. It could be that the pound starts making gains against the euro and the US dollar. Why not, the weather has been nice so why can’t the financial climate be ideal, too? Plus, the Tories is expected to win the upcoming election, so that should also have an impact on the pound as well. So it could be that the pound stops falling and continues on strongly in a matter of weeks.