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Trump turns focus onto EU

The IMF cut global growth outlook to the lowest level since the financial crisis on softer growth across major economies.

Centtrip: Fed cuts rates for first time in over 10 years

The Eurozone became the next tariff target for Donald Trump who yesterday, 9 April proposed to impose levies on $11 billion’s worth of goods in retaliation for subsidies supporting pan-European aerospace giant Airbus. US Trade Representative Robert Lighthizer released a far-ranging list of goods including aircraft, snails, olive oil, wine and binoculars after Trump said “the time has come for actions”. The EU and investors could be concerned this may be a precursor to more drastic actions and further tariffs on European car imports to the US.

Slow growth

Meanwhile, the International Monetary Fund (IMF) downgraded its 2019 growth forecasts for every major economy for the third time in six months. It now expects the world economy will grow at 3.3 per cent this year, down from a 3.5 per cent prediction in January. The IMF also warned that it could be forced to downgrade forecasts further if the US-Chinese trade tensions continue and Brexit heads towards a no-deal.

Last-minute push

UK Prime Minister Theresa May met with Angela Merkel and Emmanuel Macron yesterday in a last-ditch attempt to gain support for her Brexit extension. The French president has been a thorn in May’s side of late, who believes a more punitive stance on Brexit is required.

May, who had been given until this Friday, 12 April to come up with a new plan or risk a no-deal outcome, today will attend an emergency EU summit where an extension to Brexit will be discussed. However, it is becoming apparent that the EU will look to avoid this cliff-edge, with a 12-month extension now on the cards. All 27 member states must agree to any extension, so May still has some work to do.

Data relay

The UK will today release Gross Domestic Product (GDP) data, which is expected to show that growth plateaued in February, falling from 0.5 to 0 per cent. With China, the Eurozone and the US already pointing to a global economic slowdown, the UK will be unable to escape it either, especially considering Brexit uncertainty. If the data falls below expectations, we can expect Sterling to weaken, potentially exacerbated by today’s events in Brussels.

In addition, the European Central Bank (ECB) will release its interest rate decision, which will be followed this evening by the Federal Reserve (Fed) release of the minutes from its March meeting. Although there is no expectation that the ECB will adjust interest rates, any sign that the Fed could still raise rates later this year could cause volatility in EUR/USD due to policy divergence.

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