The British pound has moved higher in the Tuesday session. In North American trade, GBP/USD is trading at 1.3376, up 0.46% on the day. On the release front, British Services PMI improved to 54.0, marking a 3-month high. This beat the estimate of 52.9 points. On the release front, U.S manufacturing and employment reports were sharp. The ISM Non-Manufacturing PMI climbed to 58.6, beating the estimate of 57.9 points. JOLTS Job Openings improved to 6.70 million, crushing the estimate of 6.49 million.
Canada is the host of the G-7 meetings this year, and finance ministers from six countries were united in their criticism of US Treasury Secretary Steve Mnuchin over a brewing trade war. Last week, the Trump administration imposed stiff tariffs on Canada, Mexico and the European Union. Prime Minister May expressed her disappointment with the U.S move in a conversation with President Trump. Canada will host the G-7 leaders on June 8, with the U.S tariffs sure to be high on the agenda. If the trade battle escalates, the result will be lose-lose and thousands of British jobs could be at stake.
A rate hike in June from the Federal Reserve is virtually a given, with the CME Group forecasting the odds of a rate hike at 94%. At the same time, there is increasing talk that the Fed is moving closer to a neutral monetary policy. Recent statements by FOMC policymakers appear to support such a conclusion, which would mean that the Fed would let the economy ‘ride on its own steam’ without intervening by adjusting interest rates. The minutes of the May meeting noted that policymakers would consider allowing inflation to rise above the Fed’s 2 percent target for a temporary period, which means that the Fed would not rush to raise rates based on the inflation target. After June, the Fed is most likely to raise rates in September. Analysts are divided on whether a fourth rate hike will be needed. If the economy is in danger of overheating, policymakers would have to seriously consider another rate increase in December.
The on-again-off-again Korea nuclear summit is back on, complete with a starting time. The much-heralded meeting between President Trump and President Kim Jong-un will take place in Singapore on June 12, at 9:00 AM sharp. The summit will mark the face ever face-to-face meeting between leaders of the U.S and North Korea, but Trump has tried to lower expectations, saying that he doesn’t expect the sides to sign an agreement. Rather, the meeting would mark the start of a process. North Korea is unlikely to agree to denuclearization, but the fact that progress is being made could boost investor risk appetite and weigh on the safe-haven Japanese yen.
