Written by Millan Chauhan
In the US, we saw the Federal Reserve (the Fed) keep rates within their target range of between 5.25% – 5.50%. Expectations were that the Fed would hold rates steady, however some were concerned we had seen an uptick in inflation earlier in April in March’s CPI print.
Last Friday, the latest US jobs report was announced which showed that 175,000 jobs were added in April, this came in below expectations of 243,000 jobs. Markets reacted buoyantly to this news, taking the view that the data indicated that the labour market could be slowing, that higher interest rates are now slowing down the economy and that some easing could become possible. The Fed have placed priority on two data points in particular, which includes slowing inflation and the strength of the labour market. Hence markets are eagerly looking ahead towards April’s inflation print, which gets released next Wednesday.
Elsewhere in continental Europe, we saw the Euro Area inflation rate slow to 2.4%, which was in line with expectations. The Euro Area core inflation rate (which excludes energy and food prices) also fell to 2.7%. The European Central Bank (the ECB), are set to meet next week to decide on the trajectory of interest rates; and with inflation cooling and moving towards the target rate of 2.0%, the ECB could begin cutting interest rates at their next monetary policy meeting in June.
In Japan, we have recently seen the Japanese yen weaken to levels not seen in 34 years, and there has been speculation that the Japanese authorities would intervene. Some suspect this happened last week, and we saw the Japanese Yen appreciate 1.9% (vs GBP). Japan have held interest rates at very low levels (compared to other developed countries) which has contributed to its weakening.
As ever, we believe diversification within the portfolio is imperative, as we continue to see mixed market narratives and ever-changing macroeconomic conditions.
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