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Expectations Low for China-US Trade Talks; Brexit Battle Continues

Published May 3, 2018
  • Treasury Secretary Steven Mnuchin arrived in China for trade talks with analysts, expecting the negotiations to be difficult. The Chinese government has said that it won’t accept any pre-conditions or submit to any threats made by the US. This rhetoric has only heightened the already tense relations between the two nations.
  • The Federal Reserve’s decision to hold rates included the reasoning of the “symmetric nature” of their inflation target, indicating that the central bank will not panic about reaching its 2.00% target. Meanwhile, the ECB faces an unexpected drop in consumer-price growth to 1.2%, with core inflation falling to the lowest numbers in more than a year at 0.7%.
  • Pro-Brexit ministers rejected Prime Minister Theresa May’s push towards a compromising solution for accessing the European Union’s customs system. May was outnumbered during a meeting with her inner cabinet, further complicating the UK’s exit. May now has as little as one week to reach a deal regarding the customs union or face leaving without a deal in place, both of which could signal the collapse of her majority government.
  • USD strength has continued to coincide with events related to the Fed’s tightening of monetary policy or risk-off sentiment, precipitating safe haven flows, however, the greenback could struggle if investors realize that the flattest yield curve in over a decade effectively restricts the Fed’s abilities to tighten policy too much.