Central bank double trouble (BOJ & BOE)

It’s central bank double trouble – the Bank of Japan and Bank of England decide interest rates also UK catalogue retailer Next reports interim earnings.

 

The political context for the Bank of Japan makes this meeting a little more interesting – New PM Yoshihide Suga has said he is a Abenomics-believer so the general thrust of the central bank’s QQE policy should remain the same but there is an off-chance the BOJ turns more dovish- if that’s even possible without the use of a helicopter full of money.

 

Japan appears to be coming out the other side of a new wave of virus infections and markets are relatively calm so there’s no need to cut rates or target a lower yield on government bonds. The mostly likely mover for the yen is probably whether or not the BOJ upgrades its economic assessment or not.

 

There is a growing consensus that the Bank of England will act again at its November meeting so if that’s the case, today will be a primer for markets. The end of the government furlough scheme in October coupled with the rising chance of everyone’s favourite cliff edge, a no deal Brexit– all point to action, most likely more QE come November.

 

If the last meeting is anything to go by, the BOE are in a bit of a muddle over negative rates. Their policy review concluded they would cause more harm than good but Governor Bailey followed it up by saying they are in the toolbox.

 

Next sales were down 28% on last year in July which served to show the pain UK retailers are feeling from the lockdown and economic fallout from it- but that was better than forecast and showed the resiliency of Next’s catalogue – now online business. Next suspended buybacks and dividends so this quarter will be important to show investors it used the funds well .

 

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