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Pound Drops as Inflation Tumbles, Eurozone Inflation Misses, and South African Inflation Hits Seven-Year Low

April 18, 2018 10:35 am | Modified September 4, 2018 7:18 am
EUR, GBP, ZAR | BY Ashleigh Fox

The Pound sank across the board on Wednesday after UK inflation hit a one-year low at 2.5% on the year in March. Investors in the Pound deemed the reading as bad news when it comes to UK interest rates; speculation widely forecasts a rate hike by the Bank of England in May, although with inflation ebbing there’s less pressure on the Monetary Policy Committee (MPC) to make a move.

 

However, not everyone is pessimistic about what lower inflation means for the UK economy; Senior Economist at the Institute of Directors, Tej Parikh commented:

‘Today’s figures show a significant drop in inflation, and it is expected to continue to fall over the course of this year. This will be welcomed by the business community who have seen high inflation act as a major speed bump on economic growth ever since the beginning of last year.

‘The drop in inflation will also offer much-needed breathing space for households who have been wedged between weak wage growth and rising price levels, which in turn will hopefully bolster consumer confidence and sales activiity.’

Additionally, UK house prices noted a fall in February on the year, from 4.7% to an unexpected 4.4%. The decline has been attribbuted to a fall in London property prices, and prices in the UK’s capital city have been the most lethargic on the year since 2009.

Meanwhile, in the Eurozone, the final reading of the Eurozone Core Consumer Price Index came in stable at 1.0%. However, the non-core measure disappointed, dropping from 1.4% to 1.3%. Dovish European Central Bank (ECB) comments have recently pushed down the Euro as investors believe the central bank could maintain its ultra-loose monetary policy stance for longer.

South Africa also released inflation rate figures on Wednesday which have shown a slight decline in March on the year, from 4.0% to 3.8% – a seven-year low. March was expected to see a 0.6% upswing, but instead only registered 0.4%. The South African Reserve Bank (SARB) has a target between 3-6%, and today’s reading is the 12th month to remain within the target area.

The Pound to South African Rand (GBP/ZAR) exchange rate is trending at 17.003. The Pound to Euro (GBP/EUR) exchange rate is reaching 1.1477.

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