Economist insights: International trade tensions are mounting, the agreement between France and Germany contains the institutional risk in the eurozone (p.2)
› Trade tensions have continued to escalate, with the US threatening to apply trade tariffs of 10% on USD200 million in US imports from China…
› … preventing Beijing from retaliating on the same scale, as Chinese imports of US goods total just USD130 billion
› The European Union’s retaliation to US trade measures was contained, in accordance with the rules of the WTO…
› … and the 20 June Franco-German agreement seeks to maintain cohesion ahead of the upcoming European summit, limiting a further rise in the institutional risk
Focus Central Banks: H1 2018 review, outlook and implications (p.5)
› In H1 2018, the Fed raised its key rate and revised up its rate outlook, while the other major central banks delayed the exit from their accommodative monetary policies
› This divergence in monetary stance is likely to continue to widen in the upcoming months, according to our analysis, but gradually, as the Fed should not be able to accelerate the pace of its rate hike cycle…
› … without becoming exposed to an abrupt appreciation of the dollar, which would be harmful to the US economy and dangerous for international financial stability
› Thus, the decorrelation of US bond yields from those of the other major economies should persist and the dollar should continue to appreciate against the main currencies, but at a moderate pace
Weekly Economic Insights - June 25th 2018 - Trade barriers, Franco German agreement and central banks
