With no major macro data points for markets to focus on, markets were left to extend the Dollar’s multi-day rally against both developed and emerging market currencies. Sterling and the higher-yielding Australian Dollar continue to underperform, weighed down by two lingering and over-arching issues: Brexit and the US-China trade war.
In the UK talks between the ruling Conservative Party and the opposition Labour Party have all but unsuccessfully ended with Prime Minister May under increasing pressure to resign or at the very least set a timetable for her departure. However, she has seemingly opted for one last throw of the dice by planning to ask parliament to vote on the Withdrawal Agreement Bill (a critical precondition for the UK to officially leave the EU) in the first week of June. As always, there are still doubts as to whether she can command a majority in a bitterly divided parliament and what would happen next should parliament vote against the WAB.
Similarly, the escalation in the US-China trade war is set to run further. Neither side is seemingly willing to concede and both sides are threatening further retaliatory measures, including higher tariffs on each other’s imports and in the case of China a weaker Renminbi. This has had a knock-on effect on other Asia-Pacific financial markets, including AUD/USD which has traded below 0.69 for the first time since early January.
