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US Dollar stronger as US and China step away from trade war

Published: Monday 21 May 2018

  • Empty diary leaves central bankers to lead the day
  • Pound up against Euro
  • Fireworks to follow Italian coalition decision
​​By David Johnson

Now that was Britain putting on its best show. A spectacular wedding in beautiful sunshine with some very memorable moments. Personally, I am in love with the big grey horse on the left at the front of the procession who wanted to canter the whole way. My kind of horse. Oh, and as a resident of Sussex, I love the fact that we now have a Duke and Duchess. Nothing has changed so far, though.
Trade war fears subsiding?
Meanwhile, America and China appear to be stepping back from an all-out trade war. That has strengthened the US Dollar and has boosted oil prices. I suspect you already knew that, because fuel prices rise at the pumps faster than Usain Bolt after a snack of Redbull and blue Smarties. There is no major data today, so the USD is likely to react only to rhetoric from three Federal Reserve speakers, unless the president tweets something, of course.
Pound up against Euro
Sterling is gaining against the beleaguered Euro, but is weaker elsewhere. It has fallen against the Australian, New Zealand and Canadian Dollars and is down to USD 1.34; a level we haven’t seen since January. As with the US market, there is no data from the UK today, so Brexit rhetoric, if any, will drive the Pound. Tomorrow’s government borrowing data is forecast to be negative, so Sterling may well slide before the close of play.
Fireworks to follow Italian coalition decision
The potential Italian coalition leader Luigi Di Maio intends to present Brussels with a raft of change proposals to redress the balance between the EU and Italy. That could do the UK Brexit negotiators a whole heap of favours. An Italian coalition is expected to be finalised today and the fireworks will follow. France has urged Italy not to rock the boat. I suspect that’ll be ignored.  The Euro is up at €1.1430 against the Pound and down to $1.1730 against the USD.
This report could be a bit of a stuck record, because there is no exciting data from anywhere today. So the markets are likely to meander their way into Tuesday.
I hope yours is a super Monday. We’ll have more to discuss tomorrow.
Tom was at the hospital visiting his best friend, Barry, who was dying. Tom asked, "If there is rugby in heaven will you come back and tell me?" Barry nodded once just as he passed away. That night, while Tom was sleeping, he heard Barry's voice in a dream,
"Tom..." called the voice.
"Barry, is that you?  What is it?!" asked Tom.
"I have good news and bad news from Heaven," said the ethereal voice.
"What's the good news?" said Tom.
"There is rugby in Heaven and I am on the team.”
“And the bad news?” asks Tom.
There was a pause and then Barry’s disembodied voice said, “You’re on the team sheet for Sunday.”

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