London RationalFX

RationalFX: UK Inflation Comes In Highest In 10 Years

RationalFX: Sterling rose to its highest level for 2021 as both employment data and inflation data for the U.K. performed strongly reaffirming the case for a Bank of England rate hike.

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Prior to this week, many investors had given up hope of a U.K. hike this year following the decision from the Bank of England to keep interest rates on hold earlier this month. However, a strong employment reading yesterday and the U.K. inflation rate hitting a 10 year high has reignited investor expectations for a hike as soon as next month.

Sterling began to build momentum against the euro yesterday morning  with it’s latest Labour market data for September surpassing market expectations.  According to the data released by the ONS, the number of people seeking out of work benefits fell by 14.9k with the unemployment rate falling to 4.3% in September below expectations of 4.4%. Crucially, employment grew by 247,000 in the three months to September surpassing expectations of 185,000 taking the total number of jobs above pre-Covid levels.

If yesterday’s employment data wasn’t enough to fuel optimism in sterling then this mornings inflation data has all but nailed on market expectations for a hike next month. According to the ONS, U.K. headline inflation rose 4.2% year on year surpassing the previous months 3.1% and market expectations of 3.9%.

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