News & analysis

GBP

Sterling moved higher against the dollar and the euro yesterday and was among the best-performing major currencies amid a general retreat in the greenback. The GBPUSD exchange rate reached its highest levels of the year so far, although GBPEUR has been less buoyant in general and despite yesterday’s gains remains well away from pre-Covid highs. This week’s round of trade talks with the EU has gotten off to a rocky start, with Brussels reportedly rejecting UK demands for access to the EU for British truckers. Negotiations will resume today. The EU commission has said that allowing the requested level of cabotage rights within EU states would be “fundamentally unbalanced” and too close to pre-Brexit market access given the UK’s lack of commitment to the EU’s desired “level playing field” commitments. October is viewed as the latest an agreement could be struck and ratified this year. This morning’s inflation data showed prices in the UK rising by significantly faster than expected. The headline consumer price index rose 1% year on year, below the Bank of England’s 2% target but much faster than the 0.6% rise last month. The jump in prices may have been due to the Office for National Statistics’ decision to resume the collection of price data for services unavailable during lockdown. The services subindex rose 2.1% in July, up from an already fast 1.8% in June. Restaurant meals made a significant contribution, although this is subject to uncertainty in the future due to the Government’s meal subsidy scheme.

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