The week kicked off with US Treasury Secretary Mnuchin comments at the forefront of investors minds. "We’re putting the trade war on hold. So right now, we have agreed to put the tariffs on hold while we try to execute the framework” he stated. A Chinese official on Friday denied reports saying that an offer has been made to purchase American goods and cut its surplus with the US by $200 billion. Adding to this, US treasury yields were holding and also closed above 3% which dampened investors sentiment. As these 10 year Treasury yields continue to rise in line with expectations of four 2018 hikes from the Fed, the dollar has rallied over recent weeks. Current expectations for three hikes this year with one in June fully are priced in, however, chances of four this year are rising towards 50/50.
Mid-week, focus shifted to FOMC minutes release, which revealed the Fed seem optimistic about the economy with the labor market continuing to strengthen and economic activity rising at a moderate rate. FOMC officials said that the economic outlook warranted another interest-rate hike “soon” with markets already pricing in a 90% rate hike in June.
In other news, U.S president Trump called off the historic June 12 summit in Singapore with North Korean leader Kim Jong Un, the meeting would have been its first face-to-face between the two. In Trump's letter addressed to “His Excellency” he wrote, “Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting”. Adding “Your talk of nuclear capabilities, but ours are so massive and powerful that I pray to God they will never have to be used”.
To cap off the week, Central Bankers were front and center with the ECB’s Benoit Coeure speaking, BoE Governor Mark Carney, FOMC member Powell, Fed President Evans, and finally, FOMC members Raphael Bostic and Robert Kaplan rounding off the speeches.