Markets and the Euro take latest Trump tariff threats in its stride
|President Trump’s threat of a 30% tariff on the European Union over the weekend, effective 1st August, has so far been taken in stride by market participants. We see this as another move straight out of the Trump negotiating playbook, rather than a concrete pledge, particularly as most of the latest communications from both sides of the negotiations have indicated that the striking of a framework trade deal is not too far away. As was the case throughout much of last week, this week presents little market moving economic data out of the Euro Area, though there will be a series of speeches by European Central Bank officials.
Now that ECB rates are at 2%, markets see room for at most one additional cut, and that is not expected any time soon. European monetary policy has now settled into a holding pattern, and the main driver for the euro for now should, therefore, be events elsewhere. Namely, the performance of the US economy and news of the Trump conflict with Fed chair Powell.
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