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Weekly Focus: Trade War Risk is Increasing

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Fundamental analysis of Forex market

Market Movers ahead

  • The next scheduled date for the trade disputes is 30 June, where the US government is set to announce plans for restricting Chinese investments.
  • The European Council meeting on 28-29 June will be important for whether the German government crisis is resolved, what line the new Italian government takes and possibly for the Brexit process.
  • We expect the June inflation number for the euro area to be 2%, up from 1.9%, but it is likely to decline again later this year.
  • The most important US inflation measure is likely to have increased in May.
  • Swedish data is likely to show another trade deficit in May.

Global macro and market themes

  • A further escalation in trade tensions has become our baseline scenario ahead of 6 July.
  • The escalation will weigh on global economic growth.
  • Equity volatility will be high, with downside risks for equities near term.
  • Industrial and agricultural commodities are primarily at risk.
  • The prospects of a stronger USD, lower commodity prices and weaker global growth weigh on emerging markets.

Full Report in PDF