While the British pound continues to steadily lose ground against the U.S. dollar, the latest data shows that food prices in the UK rose in August to their highest level in 18 months. This increase was driven by poor weather and weak harvests, which added pressure on supermarkets already struggling with high operating costs.

This discouraging combination of factors is creating mounting pressure on the wallets of British consumers. Rising prices for essential goods such as bread, milk, and vegetables are forcing families to rethink their budgets and cut spending in other areas of life, from entertainment to clothing. Inflation's impact is becoming increasingly tangible again, particularly for low-income households, where food makes up a significant share of monthly expenses.

The effects are not limited to the domestic market. Poor weather leading to failed harvests could also weaken the UK's export potential. Lower production volumes may result in reduced exports, putting additional pressure on the country's trade balance. Moreover, rising food prices in the UK could spill over to other countries importing British products, potentially triggering a chain reaction of inflation internationally.

According to the British Retail Consortium, food price inflation rose to 4.2% year-on-year, reaching its highest level since February 2024, compared with 4% in July. Prices of staples such as butter and eggs have increased significantly due to strong demand, shrinking supply, and rising labor costs. Chocolate has also become more expensive as poor harvests pushed global cocoa prices higher.

Retailers have already warned that food inflation could hit 6% by year-end as they raise prices to offset a £26 billion increase in payroll taxes and the 6.7% rise in the minimum wage implemented in April. They are calling on the government not to raise taxes on retailers in the autumn budget.

The Bank of England, which cut interest rates this month, said higher taxes are fueling inflation and unemployment. While the post-pandemic inflation surge has eased in most developed economies, the UK continues to see the fastest price growth among major Western economies.

Such negative data is also reflected in the currency market.

Technical Picture for GBP/USD Pound buyers need to reclaim the nearest resistance at 1.3490. Only this will allow them to target 1.3523, above which a breakout will be difficult. The ultimate upward target is the 1.3560 level. In case of a decline, bears will attempt to take control at 1.3440. If successful, a breakout below this range would seriously damage bullish positions and push GBP/USD down to 1.3420, with the prospect of extending the move to 1.3390.