UK Inflation Hits 30 Month High

Tuesday, 14 February: January inflation data for the UK was released this morning, and as expected, the pound’s decline since Brexit, alongside the rising cost of fuel, has led to further inflation as consumer prices increased by 1.8% compared to a year earlier. It’s an increase from 1.6% in December and the highest rate since June 2014, but comes below expectations of a 1.9% rise. Inflation looks set to rise to 2.7% by the end of this year according to recent claims from the Bank of England. Today’s announcement pushed the pound lower against both the dollar and euro, although it paired back some losses again the latter. At the time of writing GBP/USD is -0.47% at $1.25 while GBP/EUR is -0.23% at €1.18.

Chinese inflation data beat expectations, coming in at +2.5% year-on-year, making it the biggest reading for the region since May 2014. The reading is higher than December’s reading of +2.1%.

Having to settle a bribery charge is never going to help your financial performance, something Rolls Royce can say they have been a victim of. In what  is the biggest headline loss of £4.6bn, attributed by underlying pretax profit halving to £813m (although this is better than expected), as well as a £671m bribery settlement with the US, British and Brazilian authorities. The group’s costs are in pounds, although their international aerospace contracts are priced in dollars, and currency hedging hasn’t exactly gone their way of late. The shares were rooted to the bottom of the blue chip index, but reclaimed some earlier day losses to close -3.99%. At the opposite end of the index TUI AG, the parent owner of the likes of Thomson Holidays and First Choice Holidays finished the day +5.27% after reporting a narrower loss for Q1 2017, whilst saying trading remains in line with management expectations for the year ahead.

As we got to publish this evening, US Federal Reserve chair, Janet Yellen is speaking to Congress for the first time since Trump became President of the US. Yellen has signalled the central bank could consider raising interest rates at its next policy meeting in March (current expectations are at 17.7%), should job gains and rising inflation continue to progress. She also warned of caution over not waiting too long to raise rates, warning that having to raise rates quickly, over a shorter period of time, “could risk disrupting financial markets and pushing the economy into recession”. The Fed raised rates in December by 0.25%, only the second rise in 10 years. Further speculation on three rate rises over the course of 2017 haven’t been mentioned, as was previously indicated in December.