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As you are probably aware, elections do tend to have some effect on currency rates and stock prices. A new government normally reflects uncertainty (for a few weeks anyway) until their leadership begins to show signs of becoming established.
Probably not since the second terms of Margaret Thatcher and Tony Blair’s government, have the markets been so confident in sterling’s ability not to suffer too adversely after the upcoming election. The impact of another Tory government has already been factored into most market prices. The compound effect of Brexit on the markets has also slowed somewhat. Until meaningful discussions are had, Brexit will remain a talking point for British nationals and expats alike.
Sterling took a slight hit yesterday as the Bank of England released higher than expected inflation figures. The expected jump was between 2.3 – 2.6% but the actual figure was 2.7%, the highest rate since September 2013. These latest inflation figures were boosted by rising airfares during the Easter holidays, rising clothing prices, higher car tax and electricity prices also pushed up the rate which in turn will push up consumer prices.
Many economists say the impact of the fall in sterling on consumer prices will be felt more strongly in the coming months, and Mark Carney expects inflation to peak at nearly 3% by the end of this year. All of which will once again hit the general public’s wallets and purses.
This morning sees some fairly key statistics being released.
At 9:30 am this morning, we have the ‘Average Earnings’ data release. This measures pay and bonuses from public and private companies on a quarterly basis. This potentially shows a difference each quarter, which can be used as an indicator of how the economy is doing. If business salaries and bonuses are up, then business is good, which can be interpreted as a bullish economy. However, that statement comes with a downside. This is because this data release is also a key indicator of consumer inflation. This is because, if a company takes on extra staff, it will have to pay for those staff and these costs are usually passed on to the consumer, which in turn pushes consumer inflation upwards.
Two other data releases at the same time this morning are the ‘Claimant Count Change’ and the ‘Unemployment Rate’ figures. The claimant count change, shows the numerical difference in people claiming benefits each month. The unemployment rate (although considered a lagging indicator because of when it is released) is normally considered as an indicator of economic health.
However, these figures are regularly called into question as benefit claimants and the unemployed regularly see their benefits stopped for one week to a fortnight and then receive their benefits again. This contributes to these particular data releases not having as much of an impact as they should do. However, the markets still tend to reflect good results, thereby buoying up rates and prices.
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T: +44(0)1442 892 060