Politics continues to dictate events in the foreign exchange markets

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…

Huawei ban can have consequences worldwide

On 16 May, the US Department of Commerce imposed sanctions on the Chinese technology giant Huawei. US companies can only do business with Huawei subject to strict conditions. The reason given for this measure was that the company was involved in „activities that conflict with the national security interests of the USA“. Huawei is not just any Chinese technology provider, but one of the leading suppliers to the telecommunications industry, one of the world’s largest smartphone manufacturers and a major manufacturer of notebooks and smart watches. The ban is therefore aimed directly at the „heart of the Chinese technology sector“ and thus represents a further escalation in the trade conflict between the USA and China. Only four days after the sanctions came into force, the US authorities granted a 90-day postponement, having evidently realized that the measures would affect not only Huawei but also multiple U.S. telecommunications companies and customers….

Escalation of the customs tit for tat eats into growth even further

The trade dispute between the USA and China threatens to escalate further. Owing to the strong international interconnections and closely interwoven supply chains there is hardly a country that is not in some way or other affected by this conflict. Only a few days ago, the Vice President of the US Chamber of Commerce was quite optimistic about the course of the trade talks between the USA and China. Now, however, the impression is that a new Ice Age is upon us and everything has gone back to square one. In the final analysis, the news in recent weeks was continually shaped by a constant “up and down”, albeit in a far more moderate tone of voice. Given the new, tough tone, we should cast a glance at what consequences the further escalation of the customs tit for tat has for the two countries directly affected and for Euroland, too….

China: Economic stimulus measures showing first effects

China’s economy seems to have fallen back into step. Economic growth stabilized at 6.4% at the beginning of the year. This comes as a positive surprise. Above all, the very dynamic acceleration of industrial production in March by three percentage points to 8.5% signals that the economic stimulus measures initiated by the Chinese government in recent weeks are having an effect. State investment activity and investment in infrastructure have also picked up. Clearly problematic is that we are once again seeing the „old“ stimulus packages with the typical longer-term risks to financial stability and potential growth. The OECD has only recently warned Beijing of this. On the other hand, the boost to private consumption thanks to the VAT reduction from 16% to 13% is to be welcomed. It should also prove conducive to spurring demand for automobiles which has fallen sharply. However, there are still no visible signs of this…

Massive surge in share prices in the first months of 2019

In the first few months of this year, share prices literally skyrocketed on financial markets. But as headwinds pick up, this trend is unlikely to continue unimpeded. For almost all asset classes, 2018 was not a good year. But the complete reverse is now the case in the first months of 2019, with virtually all asset classes staging a positive performance since the beginning of the year. The good performance of equity markets in particular highlights the extent to which the price losses in 2018 were overstated. In fact the growth expectations have actually deteriorated over the course of 2019 so far, and the political risks have not improved much either. On the other hand, uplift has come once again from the central banks: the US Federal Reserve ended its cycle of interest rate hikes, and the ECB dashed any expectations of interest rates rising in the near future. It…

China lowers its growth target – no big deal

China’s government has lowered its growth target for this year. That is not necessarily bad news, and the step likewise did not come as a complete surprise. In recent weeks, countless provinces had already reeled their targets back in. The economic indicators since the beginning of the year have predominantly been weak. It is no secret that the prospects for China’s economy are at present anything but rosy. The trade dispute with the United States is leaving an ever more obvious dent in China’s economic cycle, and not just the US customs tariffs imposed on Chinese goods delivered, but also the counter-tariffs Beijing has imposed on imports from the USA. It was only logical that in his opening speech at the National People’s Congress that has just begun, Premier Li Keqiang cited the trans-Pacific trade conflict as the reason why the targets were being lowered. However, the step taken is…

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