Overall, the political situation in Europe remains relatively unclear, which is placing Europe at a disadvantage compared to the USA. What’s more, Trump’s policy, which is very inward looking and tailored to the advantage of the USA, is increasingly making itself felt in the foreign exchange markets. This has led to a sustained appreciation of the US dollar. In the short term, the escalating trade dispute is also likely to put far less of a strain on the US economy than on the rest of the world, which should also have a positive impact on the US currency. Overall, US president Trump also continues to hold the “trump” cards in his hand, which ultimately also makes his political style possible.
Global foreign exchange markets have been dominated primarily by geopolitical and trade policy developments during the past few weeks. Uncertainty has been caused not only by the well-known conflicts such as the bilateral trade dispute between the world’s two largest economies, which has become more acute again, but also by new trouble spots with an uncertain outcome, including the danger of war in the Persian Gulf. Ultimately it is not surprising that safe havens such as the Japanese yen and the Swiss franc have been increasingly sought after again recently.
Political issues are also likely to continue to dominate the news in the next few weeks with the most closely tracked event around the globe likely to be the G20 Summit taking place in Japan on 28 and 29 June. This will also feature a meeting between US president Trump and his Chinese counterpart Xi. With the past few weeks resembling a rollercoaster ride as far as the hopes and fears surrounding a solution to the US-Chinese trade dispute are concerned, it is now once again time to keep one’s fingers crossed for a trade-policy break-through. Admittedly, while not everything is likely to have been settled by the end of June as far as a solution to the trade dispute is concerned, signs of détente are likely to predominate and should help reassure the markets.
However, Europe is also by no means short of top-notch political events. And this is not due, as might perhaps be assumed initially, to the still unresolved Brexit question. Admittedly, Westminster will no doubt soon be sharing with us its thoughts on the planned EU withdrawal again. But this time political London will have to share attention with the elections to the European Parliament taking place from 23 to 26 May (“European elections”). As regards the EU-wide vote, the populist parties will probably become stronger. Hand in hand with this, not only will the euro once again be facing the worrying question of the current cohesion of the European international community, but the long-standing political conflict between Brussels and various east European member states also makes it clear how difficult it already is for the EU to speak with one voice. Given the many and varied global challenges the EU is facing, a further weakening would be inopportune at the present time. But this does not seem to worry the deputy Italian prime minister Salvini. Indeed, with the criticism he recently levelled again at the EU’s fiscal rules he has made it abundantly clear that, given the focus on national interests, the shared basic concept and the future of the European Union are faring badly.