Strong Producer Price data to indicate future inflation
The fate of the pound will become a little clearer today as inflation data for March is released. Inflation has been growing steadily since the monumental fall in the pound since the Brexit vote.
Successive producer price reports have shown growth in factory gate prices, to have risen by 20.5% and 19.8%. Today's YoY, NSA figure is expected to have fallen again to around 17.5%. This will be welcome relief to some members of the MPC but will still warn of inflation 'down the road'. Headline consumer prices are likely to be unchanged at 2.3% still above the Government’s 2% target.
Expect soothing words from BoE Governor Carney but the fact remains that there are inflationary pressures building in the economy despite other areas still trailing behind a little.
The question that will be asked of Carney is “when does a one-off become a trend?" Inflation has now been growing steadily this year but today’s will only be the second such read in the current trend.
Global developments closely watched
With the situation in Syria out of control, there are concerns that the whole area could be drawn into what began as a regional conflict but has become a global issue.
The JPY has strengthened in safe-haven buying as a bout of risk aversion pervaded the market and keeps ranges relatively narrow.
Syria, North Korea and France all bring a certain amount of geopolitical risk. A shock in France or a major escalation in Syria or North Korea could see the makings of another global slowdown.
G7 meet this week and economic ramifications of North Korea, Syria, the French election and Brexit will be on the agenda. Some guidance as to US intentions will also be demanded.