The Chinese dragon is breathing out sparks, but definitely not spewing outbursts of fire just yet. This can be the synopsis of China’s largest sell-off of US treasury paper in two years in March, as it remains tiny compared to China’s total UST holdings, while even Canada sold more USTs that month. Moreover, China has few alternatives where to park its massive trade surplus but in the UST market, while simultaneously, even hinting at a major sell-off would hurt the value of the $1.13 trillion worth of US debt that remains on China’s balances. In a move that signals further distrust between the US and China, Trump signed a degree that would restrict Huawei and fellow telecommunications company ZTE from selling their equipment in US markets. Later news came out the Department of Commerce added Huawei to its blacklist, which means US companies can face repercussions if they do business with the Chinese technology giant. Almost drowned out in the noise of the raging trade war, Retail Sells disappointed the 0.7% April growth expectations, by expanding only by 0.1%. Weak auto purchases seem to be the main driver of this slowdown. This may send a warning sign to Trump, as a tariff on car imports will raise prices for consumers, which decreases the number of cars purchased and will thus hurt the car retail part of the US economy.


The pound continues to fall towards 3-month lows against the US dollar this morning as momentum from yesterday’s sell-off continues. Yesterday, comments from Brexit Secretary Stephen Barclay to the House of Lords set sterling on its way as he mentioned the heightened risk of a no-deal exit or revocation of Brexit altogether should the Withdrawal Agreement fail in June. Barclay just confirmed what was already known, but complacency by the market previously meant these comments sparked an aggressive repricing yesterday while cross-party talks still bear no fruit. Should the Withdrawal Agreement fail to get passed, May’s critics within the Tory party will become emboldened. Further, the 1922 committee is to meet with the PM today at 11:30 to discuss an exit date if the WA does indeed fail. The flash headlines of a specified date will likely prompt sterling to continue selling off as it increases the possibility of a hard-Brexit member of the Conservatives taking the reins. For now, with limited data on the calendar, the path of least resistance for sterling appears to be leading down.


A sigh of relief oozed through euro markets yesterday after Bloomberg reported a leaked draft order in which President Trump intends to delay the decision to implement tariffs on European cars by 180 days, although the headline is yet to be clarified – most likely via a tweet. German and Eurozone Gross Domestic Product meanwhile came out bang on target at 0.4% in Q1, signaling surveys may have overstated how dire the economic situation in the Eurozone currently is. Today sees the trade balance at 10:00 BST as the most important data release.


The loonie saw another flurry of strength yesterday as US Treasury Secretary Mnuchin stated that tariffs may be dropped on Steel and Aluminium in order to free up the path for the USMCA trade deal to be passed. The news came on top of strong inflation data for April, which saw headline inflation remain resilient at the BoC’s 2.0% target despite the core numbers dropping below the target marginally. The headline figure was propped up by a 10% MoM increase in gasoline prices