Rate update: The trade war blues

Mortgage rates have moved very little this month, and it

still seems like their next move is tied to the trade war. The announcement of

new tariffs on Chinese goods created a nice little rally that brought rates

down close to their lows for the year. But lately, it seems like every negative

headline has been met with a conciliatory one, which has kept rates stable.

There is other news out there, and absent the trade

headlines, it might move rates. Probably the most significant is the action in

the Middle East. A new fighting war would roil markets everywhere and lead to

lower rates.

Europe also has current crises of note. Great Britain

still has a Brexit problem - deciding how it's going to leave the European

Union. Italy, on the other hand, just thumbed its nose at European Union

austerity rules, and pundits once again are talking about the survivability of

the EU.

In the US, we're watching for economic data that indicates something other than a steady as she goes economy. The next big reports aren't due for a couple weeks, culminating in the May jobs report due on Jun 7th. Analysts aren't predicting any surprises based on recent

economic activity.

And that brings us back to the trade war. Barring

something extraordinary happening elsewhere in the world, I think the fate of

interest rates depends on the success or failure of trade talks.

Resolution would remove the biggest uncertainty

for the economy and almost certainly would lead to higher rates.