Two themes dominated markets last week: i) the ongoing trade war between the United States and China and the imposition of US tariffs on Mexico and ii) the continued inversion of yield curves, including in the US, in a context of low inflation and jittery equity markets.
This has benefited the Dollar which gained 0.5% in trade-weighted terms, helped along the way by decent US macro data – including a jump in consumer confidence in May and stronger-than-expected growth in personal income and spending in April.
Conversely, Sterling weakened 0.5% to its lowest level since mid-January, with markets seemingly concerned that Prime Minister May’s successor – expected to be appointed in July – may opt for a “no-deal” Brexit should Parliament or the EU refuse to play ball.
Other major currencies saw only modest changes, with the Swiss Franc and Australian Dollar up about 0.2-0.3% and the Euro and Kiwi Dollar down by a similar magnitude.
