“North Korea’s nuclear plans…”

UK Inflation Rate

The UK inflation rate in March remained unchanged from February at 2.3 percent which is at the highest level since 2013 and up from just 0.5 percent a year ago. The current rate exceeds the 2 percent target and is having effect on British households as the growth in wages remains weak. The increase over the past year reflects higher fuel costs and the weakening of the pound since the Brexit vote. The British retail consortium reported that retail sales fell the most in six years in the first quarter of 2017.

President Donald Trump retreats from a core campaign promise

Trumps seems to have a shift in opinion from last year’s election campaign of accusing China of manipulating its currency. In an interview with Wall Street Journal Trump appeared to acknowledge that China has not been intervening to weaken its currency. He said, “they’re not currency manipulators”. Following Trump’s interview and his comments that the US currency is getting strong and that it is harmful to the economy, while other nations “are devaluing their currencies”, the US 10 year bond yield declined and the dollar fell. This month the Treasury is expected to release its first report under the Trump administration on foreign-currency practices. This report is the formal way to see if a country is manipulating its currency that would lead to negotiations and penalties. The department is by law required to report to Congress twice a year as to whether America’s major trading partners are manipulating their currencies. In last October’s report the Treasury included China and five other nations on a watch list for countries that are at risk of engaging in unfair foreign exchange practices. However, no country has been designated as a manipulator a step the US has not taken since 1994. A new monitoring list was created in April subsequent to the law passed by Congress which requires closer scrutiny of foreign exchange regimes. The three criteria developed to identify if there is any unfair practice are: an economy having a trade surplus with the US above $20 billion; having a current account surplus amounting to more than 3 percent of its gross domestic product and; repeatedly depreciating its currency by buying foreign assets equivalent to 2 percent of output over the year. Where all three criteria are met, the President would enter into discussion with the country and seek potential penalties.

Oil

Although there is speculation that the OPEC (The Organisation of Petroleum Exporting Countries) and its allies will extend their six month formal agreement aimed at eliminating a global glut and is helping to increase oil prices, there is concern that rising US output will have a counter effect. Saudi Arabia, which is the largest OPEC producer reduced its supply below 10 million barrels a day in March, exceeding what was agreed under the deal according to OPEC’s monthly report. The group is scheduled to meet in Vienna on May 25. Saudi Arabia will decide on an extension to the deal depending on the position taken by other OPEC nations such as Iraq and Iran as well as Russia which is not an OPEC member.

North Korea’s nuclear plans

Tension is increasing in North Asia due to expectations that North Korea can carry out its sixth nuclear test going against the United Nations sanctions and warnings from the Trump administration that could take military action. US president Donald Trump told reporters that he is relying on the president of China Xi Jinping to put pressure on North Korea to back off its nuclear weapons and missile development. During an interview with Wall Street Journal, Trump said that he offered to ease the trade friction with China in exchange for help dealing with North Korea. This year the regime of Kim Jong Un in order to advance its nuclear programs has undertaken ballistic missile fire tests and the United States has sent a fleet of warships towards Korea.

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