The Cambridge Weekly – 4 April 2022

Yield curve inversion – no April fool

It is the beginning of April, but after living through the events of this quarter, few seem in the mood for the usual April fools’ jokes. While UK consumers braced themselves for a surge in their cost of living – as the UK’s energy price cap resets and rises a staggering 54% – investors experienced a quieter week last week, which once again saw gains in equity markets, while bond market valuations suffered from rising yields.

India/Russia trade surge is ‘strictly business’

Western coverage of the Ukraine crisis has recently heavily emphasised two trends: the seeming ineffectiveness of Russia’s military might and the fierce economic bite of the sanctions regime. Both factors put pressure on Russia, and its strongman president. Isolation is harming President Putin’s standing and, the thought goes, the longer it continues the weaker he becomes. Of course, the key assumption behind this is that Putin’s Russia is indeed isolated, with the world’s major players united against his unprovoked invasion.

Japan: good value or value trap?

The Japanese yen had another torrid week last week. It closed more than 1% down against the dollar on Monday. And while the next few days saw a relief rally that wiped out last Monday’s loss, it meant the yen finished March some 5.5% below its dollar valuation a few weeks ago. This came as Japan ended its financial year – typically a period of heavy volatility – but even so it was the currency’s biggest monthly loss since 2016.