27 June 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
"Currency weakness which has seen the Yen slide 35% against the dollar since the end of 2020 has lurched into a more challenging phase in the past week, with a further 1.37% drop against the dollar that has led to its weakest closing level since 1986. A weak Yen has historically been associated with gains from the Japanese indices, as exports have been more competitive, however, this relationship has reversed in recent weeks as investors are concerned about the potential damage to growth as consumers struggle with higher import costs and weakening purchasing power. While retail sales data out today provided a positive surprise, rising 3% year on year and ahead of expectations for a rise of 1.7%, overall data reported last month showed the economy fell faster than expected in the first quarter, shrinking at an annualised rate of 2%. With rate cuts in the US looking likely to be very limited this year, the popular Yen ‘carry trade’ has been reignited, with the onus now firmly on the notoriously cautious BoJ to consider more aggressive policy options.
"Ahead of Personal Consumption Expenditure data due to be published in the US tomorrow, the preferred inflation measure of the Federal Reserve, inflation is back in the spotlight. Data out this week has already brought unpleasant surprises, with annual inflation in Canada ticking up to 2.9% from 2.7%, and Australia seeing a rise to 4% from 3.6% in the previous month. With US inflation likely to come down very slowly and UK inflation likely to rise again in the second half of the year, this risks becoming a common theme requiring ongoing exposure to inflationary assets, such as equities, commodities and infrastructure."
