The US dollar has traded in an increasingly tight range since the announcement of potential further tariffs on Sunday, as measured by the broad dollar DXY index. A Reuters exclusive built upon Tuesday’s Wall Street Journal article with sources close to the negotiating table stating that China sent over “systematic edits to a nearly 150-page draft trade agreement” late Friday evening. The edits saw Chinese officials renege on nearly all aspects and sparked the breakdown in the tariff truce. Today, Vice Premier Liu He will land in Washington to start a two-day discussion with US trade representatives, a move that calmed investors when initially announced on Tuesday. The fact the US is still open to discussions, albeit under the threat of an impending tariff increase, may be the reason why the risk-off move has been relatively muted over the course of the week. Many analysts are still expecting an eleventh-hour deal. The question is whether that deal is just to re-open up dialogues and avoid further tariffs or if the deal will include any material changes. Both parties are currently flexing their political prowess, but as history notes, this can sometimes lead to unintended consequences. If that does occur, the market reaction will likely be dramatic upon its announcement given the recent period of relative tranquillity.


Getting Britain out of Europe has never looked so difficult, something European football clubs and Theresa May have both found out the hard way recently. In Brexit, the Conservative Party kept the rules on leadership challenges unchanged, building from recent noise about reducing the grace period from 12 to 6-months after winning a vote of no confidence. Theresa May managed to stave off another attempt to oust her by pledging to discuss her future at next week’s 1922 committee. In the discussion, May also announced that she will bring forward the Withdrawal Agreement within the next two weeks – this comes while cross-party talks continue in the background regarding the political declaration.


The euro gave up much of its early gains against USD late on in yesterday’s session – a possible precursor for what was to come later in the Johan Cruijff ArenA. After the strong start of the day with a beat on German Industrial Production that saw a plus of 0.5% in March, the day kind of fizzled out for the euro with no further data releases on the calendar. The rest of the week’s data calendar remains equally sparse, which implies developments elsewhere may drive euro this week.


The loonie traded flat yesterday despite crude oil prices rallying over a percentage point following a 3.9 million barrel draw in crude oil inventories as highlighted in the US Department of Energy weekly report. Today’s major data releases for CAD will be Trade Balance and the New House Price Index at 13:30 BST. After February’s trade data showed a bigger than expected surplus of $3.5 billion with the US, today’s figures will be worth watching to see if this trend continues – and if it draws any tweets from the US President.