This week

The countdown is on it seems, with Thursday signalling just 100 days left to spend of deposit paper £20 and £50 banknotes. Interestingly, with polymer notes having been in circulation for a while now, the Bank Of England estimates that there are over 475 million notes still out there.

Whilst our own central bank may be focussed on a change in notes, many economists have been noting a change, especially in the tone of the US Federal Reserve. With inflation showing no signs of abating just yet, it was interesting to hear the shift in tone during Fed Chair, Jay Powell’s, testimony to the Senate Banking Committee on Thursday. When asked about the bank’s next moves, Powell mentioned that the Fed is "strongly committed" to bringing down inflation and would not rule out the chances of a 1% rise at some point, saying that they “will never take anything off the table.”

Powell's remarks highlight just how much the inflationary environment has changed during the three months since he last delivered a report to the committee. During the early spring, he described inflation, which was then running at a rate of 6%, as "likely to decline over the course of the year." For reference the gauge of price rises in the world’s largest economy currently sits at 8.6%.

A penny for the thoughts of the Bank of England then, as the domestic Consumer Price Index (CPI) rose yet again, to another 40 year high during the middle of the week. Coming in at a reading of 9.1%, up from the previous month’s 9% and level with consensus estimates. The largest upward contributions to the rate of inflation came from housing and household services, primarily electricity, gas and other fuels, along with transport, caused mostly by spiralling fuel costs and the price of second hand cars.

In company specific news, it seems the future is far from rosé for wine producer Naked Wines, who saw their shares tumble 50% during the week. The online wine seller said it intends to trade the business at or around break-even for the rest of 2022 amid growing uncertainty in the market. However, the company’s results did show that income had increased by 3% over the year, showing that at least the company’s profits were indeed Riesling…

Next week

With the coming week seeing us transition from June to July, we should see the start of what are called the "Dog days", those considered as the sultry, hotter periods of the year, ushered in during the summer months. Named after the rising of the star system, Sirius, (known colloquially as the "Dog Star") the period is typically known for bad luck and thunderstorms.

With many investors hoping the old adage isn’t prophetic, we begin the week being shepherded through a raft of German data, including import prices and retail sales. What will be particularly interesting is the German Bundesbank Monthly Report, released on Monday. The report contains relevant articles, speeches, statistical tables, and provides detailed analysis of current and future economic conditions from the bank's viewpoint. With Germany being the largest economy within the Eurozone, interestingly the market impact from the report tends to be greater when the report reveals a viewpoint that clashes with the European Central Bank's stance.

Switching focus to the US by the middle of the week, we will see consumer confidence figures released, often a leading indicator of future spending habits. The data is so well respected due to tis size, surveying 3,000 households, asking respondents to rate the relative level of current and future economic conditions including labour availability, business conditions and the overall economic situation.

The end of the week should be wrapped up by a slew of European PMI data. Both services and manufacturing readings for all of the continents largest economies will be included and will give us a comprehensive view of the economic state of Europe. The data will be split out amongst component parts of the bloc, with Germany and France’s readings potentially having the largest impact on markets, alongside a collated version of the data for the Eurozone as a whole.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 27 May 2022