Monday was comparatively quiet when it comes to information surrounding US tariff coverage, at the very least when in comparison with final week. The brand new deadline has been set, and now it is time to get again to the negotiating desk. Nevertheless, it must be clear that the following two weeks is not going to be straightforward. Not solely as a result of, as we all know, solely three kind of offers have been reached within the greater than 90 days since Liberation Day. EU Commerce Commissioner Maroš Šefčovič additionally indicated yesterday that there are nonetheless main variations in particular person positions between the US and the EU. At first look, this appears to contradict statements made in current weeks, the place it was repeatedly stated that the 2 sides had moved nearer collectively. However this doesn’t must be a contradiction, Commerzbank’s FX analyst Volkmar Baur notes.
USD can react to greater inflation with some weak point
“It must be remembered that such negotiations are binary. Both you attain a 100% settlement or you do not. You possibly can negotiate for a very long time and agree on 95% of all the pieces. Nevertheless, in the event you can not resolve the previous few variations, then there might be no finalization and the deal will fall by means of. That’s the reason the US authorities might be proper when it claims that it’s near reaching an settlement with many nations. On the identical time, nevertheless, this doesn’t essentially imply that even a single further deal will finally be finalised.”
“In the meantime, a US cope with India is prone to have turn into tougher yesterday. Donald Trump introduced yesterday that he intends to impose 100% ‘secondary tariffs’ on Russia in 50 days. Because of this all nations that commerce with Russia (or solely import oil from Russia, it’s not but clear precisely) might be topic to an (further?) tariff of 100% in the event that they need to export to the US. China and India particularly are identified to have elevated their imports of Russian oil since Russia’s invasion of Ukraine, which is why these tariffs are additionally directed towards them.”
“For the US Greenback, nevertheless, it’s now not really easy to evaluate what greater inflation may imply. In regular occasions, one would definitely assume that this may result in a tighter financial coverage and subsequently help the USD. Nevertheless, there are actually query marks over the Fed’s response operate, i.e. it’s not solely clear how the Fed would cope with greater inflation. It’s subsequently fairly conceivable that the USD may react to greater inflation with some weak point as we speak, as this may additional improve tensions between the federal government, which is asking for a looser financial coverage, and the central financial institution.”
