Asian equities rose overnight together with US stock futures despite ongoing concerns of an escalation in the US-China trade dispute. Positive headlines came from a confirmation that North Korean President Kim Jong Un is willing to negotiate with US President Trump.
The USD consolidated overnight after it dropped on Friday due to a disappointing employment report. The NZD outperformed all of its G10 peers on the back of speculation that the escalating trade tensions will not weigh on the economy.
The US-China trade dispute continued last week after President Trump sent a directive to the US Trade Representative to consider further tariffs of $100bn on Chinese exports. Whilst none of the measures are set to kick in yet, a retaliation from China is not unlikely and Chinese President Xi Jinping’s speech tomorrow will be followed closely by investors.
Barclays Research warns that the heightened risk of US-China trade-related tensions escalating means that “…there is an increasing risk of underperformance in trade- and risk-sensitive currencies, while likely benefiting safe havens…”
The US employment report showed a slowdown in job creation as US payrolls rose by only 103k in March, well below expectations. Average hourly earnings rose by 0.3% m/m (2.7% y/y), broadly in line with consensus forecasts and the unemployment rate remained unchanged at 4.1%.
Looking to the week ahead, the key data in the US are PPI (Tuesday), CPI data and the FOMC minutes from the March meeting (Wednesday). The US Treasury also due to release its list of countries that practice potentially unfair currency practices as early as this week. In Europe, focus will be on the ECB meeting (Wednesday) and E19 Industrial Production (Thursday).