The inflation rate in the United Kingdom fell to its lowest annual level in June, causing the pound to drop against other currencies and the stock market to rise. That being said, at 7.9 percent, CPI is far higher than the central bank's 2% goal.
According to the forecasts of market analysts, consumer prices year-over-year are expected to decrease from 8.7% to 8.2% in the month of June. This represents a deviation from the 41-year high of 11.1% that was recorded in October of the previous year.
Since investors no longer anticipate that the Bank of England's interest rates will rise over 6%, interest rate futures have caused a considerable decline in the value of the pound sterling when compared to the US dollar, the euro, and the Japanese yen.
Construction firms, landlords, and companies that deal with real estate all saw their stock prices rise as part of the FTSE 100 index. The prospect of a modest rise in interest rates in the UK has piqued the curiosity of investors.
The significant gains seen in real estate stocks contributed to a 1.2% increase in the FTSE 100 stock index. The index of the construction industry posted a spike of about 7%, making it the largest one-day rise since 2008. Nearly 6% more value was added to the index of landlord stocks.
The British pound has lost the greatest value this month against the US dollar on the foreign currency market. The pound is holding near its 15-month high of $1.1344 reached last week.
The interest rate swaps on long-term rates in the money markets suggest that the rate at the end of 2023 or the beginning of 2024 will be between 5.75 and 6% percentage points. Traders, on the other hand, are increasingly leaning toward the Bank of England not hiking interest rates by a half of a percentage point this month, but rather by a quarter of a percentage point.
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