It has been another day of volatility in equity markets driven by the ongoing trade war between the US and China but price action in major currencies has been subdued. The US confirmed today that it would as of midnight increase tariffs on $200bn of Chinese imports to 25% from 10%, with the Chinese threatening retaliation. The Chinese central bank weakened the Renminbi (via the fix) by 1% this week, which will not best please a US president keen to narrow the United States’ trade deficit with China.
Sterling was broadly unchanged following the release of in-line with consensus UK GDP growth of +0.5% qoq in Q1 2019. This was a decent rebound from just +0.2% qoq in Q4 2018 but the ONS pointed out that the £5.2bn rise in inventories ahead of the original Brexit date of 31 March had been a material contributor to headline growth. By comparison, inventories had fallen £1.2bn in Q4.
