Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.

Today, we’re looking at the UK’s stubbornly high inflation, US efforts to change global banking rules, and the yuan’s rise in currency trading against the pound.

But first, our number of the week…

30.5%

That’s how much the Philadelphia Semiconductor Index has gained in 2025, reflecting strong performance for companies involved in the manufacture and sale of advanced chips. In comparison, the tech-heavy Nasdaq has gained about 18%.

Sidekick Takeaway: While LLM startups and Big Tech firms tend to draw the most attention, chip companies have been quiet winners from voracious AI demand. With the market expecting billions in additional AI infrastructure buildout, much of that revenue could flow to these hardware firms. 

Only have a minute to read? Here’s the TL;DR:

• UK inflation rose to 3.8% in August, far above peers like the US and Germany, where inflation is under 3%. That leaves the BoE split on whether to keep cutting rates or hold firm against price pressures, with businesses expecting continued inflation over the next year.
• US regulators are pushing to change Basel III rules that currently benefit European banks, a move that could tilt global banking competitiveness toward US firms. The disagreement highlights growing international regulatory dysfunction under Trump 2.0.
• The Chinese yuan is close to overtaking the pound as the world’s fourth-most traded currency, reflecting Beijing’s success in internationalising the yuan. The pound has long punched above its weight, meaning reduced popularity could lead to a more sustainable exchange rate.

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

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Running Hot: UK Inflation Exceeds Global Peers

First place is usually something to celebrate. But right now, the UK is winning the wrong race.

In August, UK inflation climbed to 3.8%. That’s the highest level in over a year and a half and well above the Bank of England’s target.

It also places the UK far ahead of global developed peers. 

The US and Germany have inflation rates below 3%. In France and Canada, it’s below 2%. 

Due to this elevated inflation, UK interest rates seem unlikely to fall anytime soon. 

This week, BoE official Catherine Mann argued that monetary policy is already ‘relatively loose,’ and that further cuts should remain on hold. 

UK inflation seems here to stay

The BoE’s cutting cycle has brought the UK’s policy rate from 5.25% to 4% in the span of about two years.

But amidst rising inflation expectations, that cycle may be over:

• The BoE’s survey of UK businesses shows that executives expect inflation to remain elevated over the next year at 3.4%. 
• Some officials fear that price pressures from tariffs have yet to be fully passed through to consumers, which could be a source of continuing inflation.
• But not all policymakers agree. BoE Deputy Governor Sarah Breeden has argued that there are significant growth risks to keeping rates elevated. 

These factors highlight the internal debate at the BoE over the best path forward – and the delicate balance the bank will have to strike between growth and inflation.

Sidekick Takeaway: Rising UK prices will likely put continued pressure on consumers, and, indirectly, the Labour government. As Reeves considers tax hikes to plug a budget shortfall, expect rising pushback from already-squeezed voters. 

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Playing Favourites: US Seeks Change to Europe-Boosting Bank Rules

In the wake of the 2008 financial crisis, global regulators came together to better police the banking industry. 

That cooperation spawned the Basel III accords, which the US played a leading role in crafting. But under Trump 2.0, US cooperation can no longer be taken for granted. 

This week, reports indicated that US banking officials are seeking the repeal of a rule that benefits European banks like BNP Paribas.

If the repeal goes through, it could help push more investors to US banks than their European competitors. 

Eurozone: One or many?

The crux of the disagreement rests on how international risk exposure is defined for global banks:

• EU officials argue that the eurozone should be treated as one country, since the area has a single currency and an integrated banking system. 
• However, US officials argue that the eurozone is actually made up of many countries, no matter how integrated.
• Under the EU vision, European banks look less risky – under the US, they look more risky.

This might seem like a technical dispute, but it could have a real impact on bank profitability. 

Shares in BNP Paribas fell as much as 2% on news of the potential change.

Sidekick Takeaway: The US may face an uphill battle trying to push through such changes – the Basel Committee counts multiple eurozone countries as members, as well as the EU itself. But the disagreement is further evidence of continued fraying global cooperation under the second Trump administration. 

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Currency Swap: Yuan Nears Pound on Trading Volume

2025 has already been a year of significant change in global currency markets. 

As central banks shift away from US assets, ‘de-dollarisation’ looks to be gaining steam.

Now, another long-running trend could be set to change. The British pound, long the world’s fourth-most popular currency, could fall behind the Chinese yuan. 

Since 2013, the pound’s share of global currency volume has fallen by 1.6 points. Over that time, the yuan has gained 6.3 points.

That reflects successful efforts by Chinese officials to internationalise the yuan – but losing ground might not be bad news for the UK.

Currency trading comes with costs, benefits

The yuan remains just behind the pound in trading volume. The gap will likely officially close in the coming years.

China has taken steps to ease capital controls and allow foreign institutions to use the yuan, both of which have boosted the currency’s popularity. 

But having a globally popular currency comes with trade-offs.

Some economists believe that being used for reserve, settlement, and trading can distort a currency’s exchange rate, leading to negative economic impacts.

In fact, Trump administration officials have explicitly blamed the dollar’s dominant reserve status for undermining US manufacturing. 

As a result, ceding ground to the yuan may not be a bad deal for the UK.

Sidekick Takeaway: The pound has long punched above its weight class, capturing ~10% of global currency trading even as the UK makes up ~2% of global GDP. While that might be a point of national pride, reduced popularity could lead to a more fair value for the pound in the long run. 

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Notices

Sidekick Money Ltd is a company registered in England and Wales (No. 13882980). Sidekick Money Ltd is authorised and regulated by the Financial Conduct Authority (FRN 984829). Our address is 21-33 Great Eastern St, London, EC2A 3EJ.

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