Japanese yen hits 1990 low, cocoa price crisis worsens

Chocolate Crisis Worsens

Stocks were mixed at the open on Wednesday, with the FTSE 100 index declining a touch to give back Tuesday’s modest gains, essentially now trading flat a little above 7,900 after Thursday’s big jump. The DAX index was a tad firmer above 18,400.

Wall Street finished lower on Tuesday as the rally took a pause for breath with the S&P 500 index declining by 0.3%. Copper, oil, and iron ore are all weaker on China's demand worry. The gold price is down after yesterday’s sharp spike back to $2,200.

Cocoa topped $10k a ton – a totally dysfunctional market now. We are talking about cocoa prices and what this tells us about climate change in tomorrow’s special Easter edition of Overleveraged.

Inflation Data Rolls in as Spain Sees Prices Reaccelerate

Spanish inflation reaccelerated to 3.2% in March, from 2.9% in February on higher energy prices. Eurozone inflation is due up next week. The euro area's annual inflation rate was 2.6% in February 2024, down from 2.8% in January. A year earlier, the rate was 8.5%. But underlying inflation remains sticky.

Core inflation, stripping out volatile components of energy, food, alcohol and tobacco, was 3.1% — above the 2.9% expected and still well above the target set by the European Central Bank. However, we know that central banks are willing to tolerate higher inflation. Don’t miss the latest episode of Overleveraged, where we talk about Europe, inflation and the rise of the right.

Land of the Sinking Yen

The yen slumped to a 34-year low against the U.S. dollar, prompting some soft intervention from the authorities.

Finance minister Shunichi Suzuki said the government would take "decisive action" on unwanted currency volatility but declined to comment on whether this meant actual intervention.

What’s Next for the Bank of Japan?

After hitting its highest since 1990, USD/JPY slackened a bit overnight on the comments but has not budged much and the market will need more. Usually, in these situations the market will test how far Tokyo is prepared to let it go.

Rate differentials are what matters – the Federal Reserve was expected to cut more, and the Bank of Japan was probably expected to a little more than they have offered up so far. The carry trade is not quite dead yet.

Pounds Down

Pound sterling trades a little weaker this morning having rejected the move to the old horizontal support/resistance level around 1.2670 following Monday’s bounce off the 200-day line at 1.2590.

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