As US President Donald Trump famously said, he was “in favor of the market.” Indeed, he announced in all caps, “THIS IS A GREAT TIME TO BUY” just last week in a bombastic TruthSocial post, replete with his signature DJT. This decision is an unmistakable indication of his intent to restore order and confidence to market participants. It’s particularly welcome amidst growing uncertainty from the United States and China’s two-year-old trade war. With each economic data release on the horizon, analysts will look with a vigilant eye upon the unfolding effects of these events on global financial markets.
Germany’s Consumer Price Index (CPI) rates for March dropped below forecasts. This raised the specter of inflation and weakened economic growth or stagflation internal to the Eurozone. The impacts from the US-China trade conflict are beginning to take hold, and they’re hurting. Most analysts expect it to be a drag on China’s potential economic growth for decades to come. This unpredictable climate is made all the more precarious by Australia’s increasingly untenable situation straddling both superpowers as their feud heats up.
Economic Data Releases and Market Reactions
Two significant economic indicators are set to be released on Monday: the UK’s house price Rightmove rate for April and China’s trade balance figures for March. These releases are extremely important as they can often offer the first glimpse at the health of these three respective economies.
In the United States, the Federal Open Market Committee (FOMC) minutes released earlier this week highlighted concerns among participants regarding the economic outlook. What they observed was a shift in perceived risk, not a new base case assumption of a severe bust.
“These moves appeared to reflect increased perceived risks—rather than a base case—of a significant deterioration of the U.S. outlook.” – FOMC participants
Participants shared their stories of fighting for jobs, and focusing on economic opportunity and climate justice. They similarly acknowledged staff-judged upside inflation risks, reflecting elevated uncertainty around their respective economic outlooks.
“As a result, participants generally saw increased downside risks to employment and economic growth and upside risks to inflation while indicating that high uncertainty surrounded their economic outlooks.” – FOMC participants
Particularly when currency markets are abuzz with uncertainty. With inflationary pressures easing in Germany despite worsening overall inflation, the Euro continues to hold strong against the dollar, pound, and Yen.
Tariff Plans and Global Economic Tensions
In a notable change of heart, President Trump said he would pause. He will postpone the entry of the new higher tariffs by 90 days. His announcement has at least delayed plans for his proposed additional tariffs. This step provides much-needed salve to jittery global markets spooked by ratcheting trade wars.
Of all the economies impacted by this potentially harmful decision, Japan’s is most negatively affected. Bank of Japan (BOJ) Governor Kazuo Ueda reiterated that trade policy risks warrant watching. He inferred from this that the BOJ will remain on the sidelines in the near term. They are waiting for a more definite idea of the tariffs the US might levy on Japan.
“We need to pay due attention to risks, especially recent heightening uncertainty over developments in each country’s trade policy.” – BOJ Governor Ueda
Consider how tariff discussions have become the dominant theme. Despite the substantial financial might of the European Central Bank, analysts warn that these disputes are severely affecting the Euro’s mobility right now.
“The tariff narrative has taken over the direction of the EUR. In spite of easing inflationary pressures in Germany, the EUR appears to be gaining against the dollar, pound and Yen, showcasing how the narrative emerging from EU Leaders and US President Trump has dictated the week.” – Analyst
Australia’s Position Amidst Global Trade Wars
Australia is desperately caught between China and the US as those two engage in ever-deepening trade wars. Australia’s economy is booming, underpinned by a strong trade relationship with Asia. The new employment data for March will be very important in judging its domestic economic health.
Analysts have been salivating over the upcoming Thursday data release. Together, this data will shine a much needed light on just how well Australian jobs are faring in the face of global uncertainty. Today, Australia sends over 40 percent of its exports to China. So any bad news from the current trade war would be very damaging to Australia’s economy.
Analysts out there ahead of the curve are watching Japan’s nationwide CPI rate for March like a hawk. The full release is planned for this Friday. That result could further affect market sentiment at a time when talk of tariffs and inflationary concerns have already spooked the financial markets.