Our Fed is very disruptive to us

Marius Paun | London, UK | Senior dealer | Friday, 14th June 2019

It seems the US has reached an agreement with Mexico and President Donald Trump has now tweeted that tariffs would be suspended indefinitely. So much for ‘tariffs are a beautiful thing’ then… As a result, the greenback was given a lift, despite the weakest US employment report released less than 24 hours before. Later this month we could see the re-opening of negotiations between China and US at the G20 meeting, although it’s widely understood that a resolution of trade tensions between these two will require a lot more effort.

We saw a larger than anticipated trade surplus for China in May due to higher than expected exports (despite trade dispute escalation), coupled with lower than expected imports. At the same time, Chinese state-owned Bank of Communications International said ‘weakened valuation of the yuan is decided by the recent tough trade environment China is facing’ but added that they believe the yuan will drop below 7 within 3 months.

The race for the UK Prime Minister has seen the first round of voting which the clear favourite, Boris Johnson, has won by quite some margin after promising an income tax cut. He has already expressed his views that Brexit will happen on October 31 with or without a deal. However, despite previous concerns about a possible hard Brexit hurting the pound, cable (GBPUSD) was trading conditions were stable, around 1.2650, Friday morning.

Meanwhile, the ECB officials are starting to fear the market is losing confidence in the region inflation’s control which could force another round of stimulus to re-establish control. So much so that governing council member Olli Rehn said the central bank could strengthen forward guidance, cut interest rates and relaunch quantitative easing.

Australia’s (May) employment data release showed mixed signals, with an addition of 42.3k jobs (hugely above the expectation for 16k gain), while unemployment rate came in at 5.2% versus 5.1% prediction. Aussie dollar moved lower with many now seeing an increased chance for further easing in the coming months.