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UK October end-services PMI 48.8 vs. preliminary 47.5


  • Before 50.0
  • Composite PMI 48.2 vs 47.2 preliminary
  • Before 49.1

Despite the upward revision, UK services activity is set to slump at its fastest pace since January last year. Business optimism also fell to its weakest level since April 2020 as general conditions were affected by contracting demand and greater risk aversion among customers, largely due to political uncertainty. and increased economy. S&P Global notes that:

“UK service providers reported the biggest decline in business activity for 21 months in October, as cuts in household spending and contraction in business investment combined to reduce new order volumes. a number of companies have noted that political uncertainty and rising borrowing costs since the mini-budget have led to greater risk aversion among customers and a wait-and-see approach to new projects. also reported that higher energy bills led to reduced spending on non-essential services.

“Headline input price inflation slowed for the fifth consecutive month in October, signaling a gradual easing of cost pressures from record highs seen this spring. faster than at any time in the history of the survey before the pandemic, due to further significant increases in energy costs and staff salaries.

“Stubbornly raised inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term, rising borrowing costs and concerns about the UK economic outlook all contributed to weakening business optimism in October. Aside from the slump at the start of the pandemic, confidence in the service economy is now at its lowest since December 2008.”


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