Wobbly Trump:
The White House has changed direction once again, lashing out at China and Brexit in one foul swoop. Attacking Brexit, Trump said that the deal is not a good deal for the United Kingdom; instead, it favours the European Union, prejudicing British trade and independence. Drawing from dubious foundations, Trump also noted that the deal could prevent the UK from trading with the United States and other critical trading partners during the transition period. Speaking ahead of the G20 Summit taking place on Friday and Saturday of this week, Trump drew into question scenarios that had been assumed as given for several weeks. For a long time now, markets have priced in the possibility of trade resolution between the conflicting trading leviathans of China and the United States. However, news has come to market that should Trump and Chinese President Xi Jinping not agree upon a trade resolution this weekend, further tariffs upon billions of dollars’ worth of Chinese exports could be levied. Moreover, the tune of tariffs is up for negotiation, with sanctions anywhere from 10% to 25% being discussed. The two increasingly protectionist states must agree to trade more freely upon a level playing field, affording mutual access to each others’ markets. Following increasing defensive demand, the US Dollar has appreciated moderately, clawing back the 1.13 resistance level against the Euro. Should the two states agree to suspend the inhibitions to trade (that have been generated through the levying of tariffs) global growth forecast would be revised upwards. The increase in risk appetite could prevent the Dollar from appreciating further, however, the opportunities for domestic economy growth will offset this effect. Despite the crisis unfolding in Italy day by day, Mario Draghi, President of the European Central Bank, has reaffirmed his commitment to normalise monetary policy by the end of this year. The asset purchase program that the ECB has embarked upon since promising to do “whatever it takes” to save the Eurozone now stands at a colossal $2.6 trillion. Removing the ultra-accommodative monetary policy is imperative for the Euro to recover value and stick to the timetable of hiking interest rates following the summer of 2019.
Discussion and Analysis by Charles Porter
A revised 2024 The Dollar opens stronger this morning following the Federal Reserve’s decision last night. The decision confirmed interest rates were to stay on hold following this meeting. As we have highlighted following previous decisions, the forward guidance offered by the Chair Jay Powell was once again underwhelming. However, the Dollar’s bid this morning […]
GBP While the Bank of England’s decision to pause on raising rates by the narrowest of margins with voting 5-4, that resulted in GBP being sold sharply which reflects the market’s view that while inflation at 6.7% looked better than expected yesterday, the effect of higher oil prices and petrol and diesel at the pumps […]
OECD Those fun loving folk at the Organisation for Economic and Cultural Development are at it again by forecasting that the UK will in 2023 stand at the very top of the G7 for….our rate of inflation at 7.2% which is a great deal more than the promised rate by the UK Government for the […]