The renewed trade war between the US and China, including the increase on Friday in US tariffs to 25% from 10% on $200bn of Chinese imports, drove acute volatility in equity markets but price action in major currencies remained largely subdued. There were few major macro data surprises and the RBNZ as expected cut its policy rate 25bp.
Nevertheless the Dollar managed to appreciate 0.4% in trade-weighted terms and is up another 0.3% since Friday to its highest level since end-December. The safe-haven Swiss Franc strengthened 0.5%, buoyed by jitters in global risk appetite.
However, the outperformer was the Euro which gained 0.7%. Signs that growth may have stabilised in Q1 and CPI-inflation bottomed out gave the until-then stable Euro a decent boost and it is up another 0.2% in the past 48 hours.
At the other end of the performance spectrum Sterling weakened 1.4% in trade-weighted terms, despite GDP growth of 0.5% qoq in Q1 coming in line with expectations. The lingering issue of Brexit once again dominated UK headlines with talks between the ruling Conservative Party and the opposition Labour Party having seemingly broken down. Prime Minister May is reportedly considering another round of indicative parliamentary votes to ascertain whether this is a majority for her Brexit plan or alternative options. Parliament last held indicative votes on 29 March but none were conclusive.
The Kiwi Dollar was buffeted by the RBNZ’s policy meeting last Wednesday and ended the week down 0.4% while the Australian Dollar was broadly unchanged.
