News this past week:
- Dollar strengthens as market prepares for Fed rate hike
- Inflation expectations rise in the UK
- Bond yields rise amid tapering rumours
- Chinese trade data disappoints, whilst inflation rises
- Eurozone industrial production beats expectations
James Klemspter (CFA) of Momentum Global Investment Management shares his view:
Consumer goods producer Unilever and retailer Tesco had a very public spat last week over the suggestion that the former’s prices needed to go up to reflect the impact of a weakened sterling on input costs. Since the surprise Brexit vote sterling has fallen 16% on a trade weighted basis implying that the UK’s imports have become more expensive. This, coupled with an increase in dollar terms of 35% in oil year to date (which translates to over 60% in sterling terms), suggests that the UK should expect to see growing inflationary pressures such as these in coming months.