The US dollar index is increasing 0.15 percent this morning amid uncertainty ahead of key Brexit votes. This drove the Sterling higher yesterday and lower this morning. The volatility seen in the British Pound reminds us of the volatility seen in the Brexit referendum in June 2016. The policy uncertainty that has clouded the investment horizon, such as Brexit, US-China trade, and gridlock in Washington, is set to clear, likely allowing for less uncertainty and better expectations once important economic agents have a clear path.
However, Chinese officials remain cautious of President Trump’s request for Xi Jinping to fly to the US to finalize the deal. They fear Xi may be disconcerted by a fluctuating Trump or forced into a last-minute deal adjustment. The White House spokeswoman, Sarah Huckabee Sanders, said that a date still hasn’t been set for the meeting. However, US and Chinese trade representatives held further talks over important issues in a phone call overnight with a Chinese news agency, reporting that arrangements were agreed to for the next stage of negotiations.
On the release side, the consumer price index year to year for February came in at 1.5 percent versus the 1.6 percent expected, and the CPI ex food and energy came in at 0.1 percent versus the 0.2 percent expected. These numbers imply that there is no need from the Fed to increase rates in the short term, so the US dollar is giving up some gains this morning.