By Enrique Diaz-Alvarez, Chief Financial Risk Officer at Ebury International Payment Company

Markets seem to withstand the last round of the “Trumpy Disruption”. The letters that Trump continues to send to the commercial partners, announcing very high duties that will come into force on August 1st are mainly interpreted as yet another postponement of the July 9th deadline and are mainly treated as a negotiating bluff.

The coins of the main economies (G10) are moving to each other, and it is noteworthy that the reaction of markets to duties is now either indifferent or reinforcing the dollar – a clear deviation from the initial reaction to April’s “release day”. Only the US government bond market continues to broadcast alarming signals, as long -term bonds continue the sell off as a response to the US budget bill and the huge deficits it provides in the perpetuity – though the picture remains smooth so far.

This durability will tested for sure this week. Markets will closely monitor trade negotiations for any evidence of progress. An additional source of concern for the dollar is the Trump’s attack In the independence of the Federal Bank, as it pushes to reduce interest rates faster than the Fed intends. The US inflation report on June, published Tuesday, could – if recorded a high rate – strengthen the Fed position. The UK Macroeconomic Calendar is also unusually full: June inflation data are expected on Wednesday, and on Thursday there will be a series of critical data on the May and June job the following day.

Sterling

The decline in the number of employees published last month threw a heavy shadow on the pound and generally on the British assets. He suggested that employers are reacting negatively to the recent round of employer contributions. This makes the publication of May/June employment data on Thursday particularly critical – perhaps even more important than Wednesday’s inflation, which is expected to make a minimal change compared to the previous month. By Thursday afternoon, we (and the Bank of England) will have a clearer picture of the extent of the deceleration of British macroeconomic elements – although the frustrating result of monthly GDP last week is not a encouraging sign.

Euro

Like last week, there is no evidence that can substantially affect markets, though there will be a series of lectures by ECB officials. Since interest rates of ECB are now in 2%markets estimate that there is room for just one yet reduction – and not immediately. Monetary policy in the eurozone seems to have stabilized, so the main driving force for the euro at the moment is developments elsewhere, such as in the performance of the US economy and Trump’s confrontation with Fed chief Jerome Powell.

Dollar

Markets seem to support Fed Powell at the moment in his confrontation with the Trump government and have almost exclude the possibility of reducing interest rates at the July Fed meeting. Everyone’s gaze is turning to the inflation announcement on June on Tuesday, as a confirmation of the Fed attitude. The impact of consumer prices has so far been limited, but this will hardly last infinitely. Importers will eventually run out of stocks they had gathered before duties and prices should be upward upward – especially in the context of a healthy increase in consumer expenditure. At the moment, the dollar seems to need a catalyst to retreat to lower levels – and a healthy inflation imprinting will hardly work as such.