The next stage of the trade war is yet to come?

02.07.2019 16:09|Conotoxia Ltd Analyst Team

Optimism in the markets after the G20 summit has passed with the announcement of the possibility of introducing tariffs on products from the European Union by the United States. This is not a new issue, but it appeared on the market a moment after the US trade war with China was relaxed.

It was often said that when President Donald Trump closed the Chinese front of the trade war, he would open the new one with Europe. This is what it can happen now, which is another very serious risk factor for the eurozone’s sluggish economy. Additional tariffs could lead to an even greater slowdown, which could force even faster action at the European Central Bank.

According to today's information, the United States added more products from the European Union to the list of goods that could be subject to retaliation charges in a long-running dispute involving Boeing and Airbus. The point is that the United States does not like the way Airbus received a subsidy, because state aid spoils the market and is an unfair competition against the American Boeing.

In response to the possible next stage of the trade war, the Japanese yen strengthened - as the traders quoted by the Bloomberg news agency say - it was a profit taking from previous increases in USD/JPY. On the other hand, the euro today strengthened in relation to the US currency after saying that the European Central Bank will not be in a hurry to introduce additional monetary stimulus at the meeting already this month.

From the planned macroeconomic data for the coming time, it is worth remembering data from China and Australia. At 00:30 the PSI index for services from the Australian economy will be published, and at 3:45 the services PMI from China will appear. Tomorrow, there will also be a shortened session (due to the preparations for Independence Day on July 4) in the United States. In turn, from Poland we will have a decision on interest rates and a press conference of the Monetary Policy Council. It may be exceptionally interesting due to the recent rise in inflation above the target of the National Bank of Poland.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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