UK inflation is back

The big news today was the rise in UK inflation, which has hit a six month high for August at 2.7%. Inflation is being driven by several factors, including wage growth and higher prices for key items like clothing, transport and recreational goods. While the pound responded positively initially to the news, the data will also mean that the Bank of England will have to raise rates again. The Bank has been inclined to keep them static in the run up to Brexit, in anticipation of economic turbulence, but if this trend continues, may have to reconsider.

The FTSE 100 still managed to close the day in positive territory at 7331 at +0.42%, after a sharp drop on the inflation news in the morning.

Positive data sees US markets off to good start

The US market opened up as investors shrugged off the ongoing saga of US-China tariff discussions and focused instead on improved housing data and rising US Treasury yields. The S&P 500 was up 0.16% while Nasdaq struggled, down 0.33% in early trading on poor data from Microsoft.

The US benchmark 10 year Treasury yield moved back above the 3% mark, which is widely seen as an important benchmark by the market. This is regarded by some Wall Street analysts as indicative of growing confidence in the overall state of the US economy and represents a migration from investors out of defensive stocks (e.g. utilities) and back into government paper.

The other big US figure was the uptick in new home building in August which represents a shot in the arm for the housing market. US housing has been the black sheep of the family for US investors this year, having underperformed the rest of the economy due to higher borrowing costs. It has not been a focus point for the Trump administration and has not benefited from rising US interest rates.

Irish border squabble drags pound down

Brexit is never far away as far as the pound is concerned – this time it was retracing previous gains as it emerged that Theresa May was planning to reject an EU offer to solve the Irish border issue. The GBP had previously reacted positively on news that EU chief negotiator Michel Barnier had made an improved offer on the contentious issue. Sterling was down against the USD for the day, and holding its own against the EUR.

The situation was not helped by the latest house price data which has shown that London housing continues to fall in the wake of the Brexit vote. It could be argued that London was unrealistically priced to begin with, but it is also seen as the area of the UK most likely to be hit by net migration out of the UK by EU nationals. Currently the Bank of England is taking the view that this is not the start of a national trend, and that stamp duty, which has damaged appetite for buy to let investments is more to blame.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.