abrdn logo black

This week

Research shows 94% of Brits did it in the last 6 hours, whilst 38% of us admitted to doing it in the last 60 minutes.

Talking about the weather is something of national pastime it seems, presumably with “it’s meant to get even hotter later this week” replacing “yes, but it’s still cold when that sun goes in” as the top ranking cliched remark of late, as temperatures push towards 30c.

Indeed, the only thing rising as quickly as the mercury in the nation’s thermometers has been inflation, with data from the week showing that US price rises are showing few signs of abating. With recessionary clouds gathering on the horizon, US CPI jumped 9.1% on an annual basis for June, up from May's 8.6% rise, its largest in more than 40 years. With Americans having to dig deeper to pay for fuel, food, healthcare and rents, it now looks like the US central bank, will most certainly hike interest rates by another 0.75% during their next meeting. With monthly inflationary readings coming in above consensus estimates, (1.3% v 1,1%), the biggest such gain since September 2005, the chances of the Fed choosing to hike by 1% have also risen significantly, with markets now pricing in a 54% chance.

On the news, it was the USD that was getting warmer, rising 1.1% against the yen, its highest since 1998, having already reached parity against the euro earlier in the week.

More signs that price rises were starting to get consumers under the weather, came in the form of British Retail Consortium figures released on Tuesday. Falling 1.3% from last month, the data showed shoppers are cutting back on white goods such as fridges and dishwashers as well as opting for cheaper brands. This was the 3rd drop in spending in as many months as consumers look to be battling an increasing cost of living crisis.

The winds of change have been blowing through Westminster since Boris Johnson resigned last week, with the race to be the next PM also hotting up. With just 5 candidates left by Thursday evening, it seems the contest should be either ex-Chancellor, Rishi Sunak, or Trade Minister, Penny Mordaunt’s, to lose. It is important to remember that whilst Sunak has garnered the most votes amongst Conservative MPs, the contest will be ultimately decided by grassroots party members, who as it stands, favour Mordaunt. With the preliminary rounds offering very little in the way of shocks or surprises, the impact on markets has thankfully been muted in what has been another challenging week for investors. Every cloud has a silver lining and all that.

Next week

With the race on to move in to no.10 now in full swing, the coming week should take on a distinctly address themed feeling.

It is only fitting that moving address should be on the agenda during the beginning of the week as Rightmove, the online estate agent, releases its House Price Index (HPI) data, detailing the change in the asking price of homes for sale on its website. Although this acts as the UK's earliest report on housing inflation, the data actually tends to produce a relatively mild impact due to asking prices and selling prices not always being correlated.

With domestic house prices beginning to cool, data detailing average hourly earnings the following day should be all the more powerful when considering affordability. The numbers represent the 3-month moving average compared to the same period a year earlier and comes in two forms, one including bonuses and one without. The earnings figures will actually be part of a wider set of labour data, accompanied by the national unemployment rate and benefit claimant count numbers, all giving us a more comprehensive gauge of the UK economy.

The middle of the week brings us an address from Bank of England (BoE) Governor, Andrew Bailey. Speaking at the Mansion House Financial and Professional Services Dinner, his words should take on added significance as inflation levels in the UK really start to bite. The market is now pricing in an 80% chance that the bank will raise rates by 0.5% at their next meeting, causing many investors to scrutinise his words for any clues as to future rate policy.

If such a move is to materialise from the BoE, Wednesday’s Consumer Price Index (CPI) figures should make for interesting reading. With inflation at levels not seen for 40 years and the cost of living crisis starting to permeate consumer spending habits, many will be hoping for some respite in what seems to be relentless price rises.

The end of the week should be wrapped up in Europe as the European Central Bank (ECB) addresses the media in what could be an historic move for the central bank. With rates currently in negative territory in the Eurozone at -0.5%, the bank could raise rates for the first time since 2011. In what seemed to be a well telegraphed move just weeks ago, commentators are now torn as to whether the ECB will go through with a hike as the economic picture in Europe deteriorates further.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 15 July 2022.