Nature

UK March PMI end services 62.6 vs. 61.0 preliminary


  • Composite PMI 60.9 vs. 59.7 preliminary

The headline reading is the highest in ten months as UK services activity resumed amid the lifting of COVID-19 restrictions and the return to offices, allowing demand conditions to s ‘to improve. But business optimism has fallen to its lowest level since October 2020 amid the Russia-Ukraine conflict, with a production load 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 pressure from demand 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 according to 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 pressure from demand 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 according to 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 also reaching a new record. S&P Global notes that:

“UK economic growth continued to soar in March after an Omicron-induced slowdown at the start of the year. Companies in the services sector led the way, with business activity growing at the fastest pace since the post-lockdown recovery seen last May Many reports of increased business and consumer spending following the rollback of pandemic restrictions Survey respondents commented on stronger demand resulting from the return to offices, alongside a resurgence in the travel, leisure and entertainment sectors.

“However, near-term growth prospects weakened in March as optimism fell to its lowest level since October 2020 as the war in Ukraine and global inflation concerns weighed heavily on business sentiment. .

“Service providers have seen the second fastest increase in business spending since this index began in 1996, driven by rising wages, energy bills and fuel prices. resulted in the largest increase in production costs for more than 25 years in March.Many survey respondents said the magnitude of the recent spike in their operating costs had yet to be passed on to customers .”


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