By Enrique Diaz-Alvarez, Chief Financial Risk Officer of EBURY

Last weekend’s news of Trump’s big retreat over China duties gave a temporary impetus to the dollar, but the effect quickly disappeared and the dollar closed a week with losses against all the main currencies (G10) and almost all the big coins. The fluctuations, however, were generally mild, with the exception of the strong rise of the Japanese yen, who was the undisputed winner of the week. The Risk Assets have responded positively to commerce developments, but also to the seemingly limited impact of the tariff incident on the real economy. The shares and bonds continued the spectacular rally of the last month. The downgrading of US credit rating by Moody’s has become known after the markets were closed on Friday, but the news seems to have a limited impact on markets so far in the first Asian transactions.

The attention seems to be shifting again from the trade war to macroeconomic and monetary news. The calendar of the week is relatively light. The main focus worldwide will be the PMI indicators for May, which reflect the business climate for the big economies, and will be published on Thursday. Given the apparent disagreement between the confidence elements and the “hard” data, markets may be reserved. The April inflation report by the United Kingdom and a series of secondary elements after the US release day will complete the week.

Sterling

Sterlin continues to be supported by the durable course of the British economy. Employment and first -quarter GDP data last week were strong, confirming that the United Kingdom economy is steadily developing, though not spectacularly, with support from business investment and the strong labor market, where real wage increases are recorded. The insistence of the Bank of England in limiting inflation and the improvement of trade relations with the EU further enhance the positive picture of the pound.

Euro

The euro is stabilized in a new price range against the dollar, maintaining levels above 1.11. However, the US economy’s resilience to duties and the retreat of Trump on this issue are currently limiting the chances of further rise. It is unlikely that Moody’s downgrade to lead to immediate overrun these levels. In addition to the May PMI indicators, this week will also be published by the Minutes of the last ECB meeting.

US dollar

April retail sales were slightly weakened than expected, but without changing the image of an economy that turns out to be more resistant to duty shock than analysts. Especially the weekly data on new unemployment benefits remain close to historically low, indicating that there are no mass redundancies and the economy continues to move close to full employment. However, the huge US budget deficit, without a historical precedent in full -time conditions, and will probably be further expanded with the imminent tax exemptions of Republicans, may attract more attention to markets. The US government will need to find buyers for a real flood of a new debt, just when global demand for such assets seems to be weakening. Degradation from Moody’s may bring this imbalance to the center.