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.