Dollar little changed

The dollar is little changed against the euro this morning, at just over $1.11, despite Trump upping the ante on trade, this time threatening to impose tariffs on Mexico if it does not stop immigrants entering the US illegally (we thought Trump had recently agreed a trade deal with Mexico!). This has been enough though to prompt a fall in Asian stocks overnight, which is spilling over into Europe this morning, and a further decline in core bond yields, with 10-year yields in the US now trading sub 2.20%

The market is also focusing on a fall in China’s manufacturing PMI in May – to below the 50 expansion-contraction threshold – reported overnight, though the services PMI was unchanged this month at well above the 50 level (54.3 in fact) as was the composite index (which combines manufacturing and services together)

Fed member Clarida says the central bank is “attuned to potential risks to the (economic) outlook…if we saw a downside risk to the outlook, then that would be a factor that could call for a more accommodative (monetary) policy”, in other words lower interest rates

The US economy grew by 3.2% year-on-year in the first quarter of this year according to the second GDP estimate released yesterday, unchanged from the initial estimate and the fasted pace of growth since the first quarter of 2015

Data due today includes CPI inflation in Germany and consumer spending and PCE inflation in the US