30 April 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Overnight data from the British Retail Consortium (BRC) reveals a welcome downtrend in shop price inflation, easing to 0.8% in April from March’s 1.3%. Non-food prices declined by 0.6% in April, which was attributed to a high degree of promotional selling, particularly in the clothing sector. With a recent stagnation in retail sales blamed partly on consumer price fatigue, reducing inflation pressures will be welcome news for households as the economy tries to break out from its recent technical recession.
“Later today, EU-wide inflation data could be the final mile-marker that then allows the ECB to cut interest rates at their next rate-setting meeting on 6th June. With country-specific CPI data reported in the past 24 hours in Germany, Spain and Ireland all broadly in line with investor expectations, hopes are that this measure will continue to show falling levels of Core CPI and a stabilisation at the headline level that may see the ECB becoming the first central bank to lower interest rates.
“Rumours-abound this morning that the Bank of Japan stepped in yesterday to support the yen at USD/JPY rate of 160, in effect making this a new ‘red line’ in the currency relationship that has seen the yen weaken dramatically over the past 2 years. With global inflationary trends seemingly ending the downward price spiral that saw the Japanese economy in a perpetual ‘twilight zone’, the Bank of Japan nevertheless retained a stance of negative interest rates until a recent shift to a range of 0-0.1% last month, the first hike in 17 years, albeit more of a ‘shuffle’ than a true hike. However, with policy rates still so low, and core inflation still above target at 2.6%, markets are yet to be convinced that the Bank of Japan is committed to do awful lot more. As a result of this and the yawning gap between rates on offer in Japan and the US, currency has been the ‘pressure release valve’ in the system. With signs of a currency intervention having taken place, this may signal that concerns of igniting a further inflationary pulse from the weak level of the yen are now too loud to be ignored.”
