The British pound has steadied in the Tuesday session, after recording five consecutive losing sessions. In North American trade, GBP/USD is trading at 1.3975, up 0.25% on the day. On the release front, the UK posted a budget surplus of GBP 0.3 billion in March, beating the estimate of GBP -1.1 billion. CBI Industrial Order Expectations, which has dropped sharply in recent months, held steady at 4 points. This matched the forecast. Over in the US, CB Consumer Confidence jumped to 128.7, beating the estimate of 126.0 points. US New Home Sales also looked sharp, jumping to 694 thousand and crushing the estimate of 625 thousand. This marked a 4-month high. However, manufacturing data was not as strong, as Richmond Manufacturing Index dropped 3 points, well off the estimate of a 16-point gain. This was the first contraction since October 2016.
The US dollar started the week with strong gains, courtesy of higher yields for 10-year US treasury bills, which rose to 2.996% on Monday. The T-bills punched past the symbolic 3% threshold on Tuesday. Higher yields for US-T bills have made them more attractive than European or Japanese counterparts and pushed the US currency higher. With oil pushing above $70 a barrel, there are concerns that inflation will rise, which has pushed bond prices lower and yields upwards. The dollar has also benefitted from a reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.
Is the US-China trade war heading to a trade truce? The markets have been marked by volatility in recent weeks, in response to tariffs which the US and China have imposed on the other. US President Trump has threatened to slap tariffs on up to $150 billion on Chinese goods, and China has promised to respond with heavy tariffs on US imports. The escalating crisis has raised fears that a trade war between the two economic giants could slow down Chinese growth and trigger a global recession. However, US Treasury Secretary Steven Mnuchin sought to lower the rhetoric on the weekend, saying that he was considering a trip to China, adding he was “cautiously optimistic” that the two sides could resolve the trade dispute.
