An uneasy truce?

And so, with one bound we are free! The US-China trade talks are back on track and all is good again, according to Donald Trump over the weekend. Markets are reacting accordingly, with Asian equities rallying overnight, which will spill over into Europe and the US today; core bond yields have spiked higher, to around 2.05% from 2% in the case of US 10-year yields; while the dollar is firmer across the board, and trading closer to $1.13 against the euro this morning from nearer $1.14 at Friday’s close. However, based on their experience of Trump and trade in the recent past, markets ultimately are likely to view the latest US-China  truce as a fragile and uneasy one, and so the moves we see in equities, bonds and currencies may be limited overall

The major central banks are likely to view the latest truce as fragile and uneasy as well and so probably won’t be dissuaded from easing monetary policy, which is the path they seem to be embarked upon, all the more so too given the latest inflation readings in the US and the Euro Area

The annual rare of PCE inflation in the US nudged down to 1.5% in May while the core rate ticked up to 1.6%, both below the Fed’s targeted rate of inflation of 2%

In the Euro Area, the annual rate of CPI inflation remained at 1.2% in June according to the flash reading, while the core rate edged up to 1.1%, both well below the ECB’s targeted rate of inflation of just under 2%

Data due this week include manufacturing (today) and services (Wednesday) PMIs in the major economies, as well as the June employment report in the US on Friday