The EUR/USD is trading in the mid 1.1500s, consolidating earlier losses. The US Dollar rose across the board on Wednesday, extending the trend of the past few months. Trade concerns remain in the limelight. The Trump Administration decided not to invoke an old law to limit Chinese investment in the US. That law, based on national security, would have given the President direct discretion. Instead, the US will block investment via the Committee on Foreign Investment in the United States (CIFUS). Markets see the move as a softening as an institution would take its time and make decisions in a cool-headed manner.
Nevertheless, the US is still clashing with China on tariffs. The duties on $50 billion worth of goods are set to come into effect on July 6th, and there are no signs it will be topped. China’s counter-measures are also in the works. The trade tensions between the US and Europe also continue, as counter-tariffs brought the EU. Markets are finding it hard to stage a convincing recovery.
In the euro-zone, leaders will come together for the European Union Summit. The event was originally all about Brexit, but both sides seem to kick the can down the road. Instead, the fate of Germany’s government and Chancellor Angela Merkel’s future are at risk. The CSU, Merkel’s Bavarian sister party, faces regional elections in October and a challenge from the far-right AfD. The party has adopted a tougher stance on migration and is at loggerheads with the Chancellor.
CSU leader Horst Seehofer is waiting for the results of the EU Summit to decide if to stay in the coalition or leave. In the meantime, the other coalition partner, the center-left SPD, has held crisis meetings prepare for potentially new elections. The crisis dampens the mood in Germany, reeling from the shocking ouster from the World Cup, and it weighs on the common currency.
