TALKING POINTS – TRUMP, JUNKER, TARIFFS, US DOLLAR, EURO, YEN
- US Dollar[1] may rise as Trump, Junker reach deal on auto import tariffs
- Japanese Yen[2] at risk as easing trade war worries bolster risk appetite
- Australian Dollar[3] lower as soft CPI data weighs on RBA rates outlook
A dull offering of European and US economic data is likely to see currency markets focused on a meeting between Donald Trump and Jean-Claude Junker. The European Commission president arrives stateside on a mission to dissuade the White House from moving forward with an increase in tariffs on auto imports. Motor vehicles are a leading export commodity and the US is the biggest overseas market for the EU.
US Department of Commerce hearings revealed the duties are deeply unpopular domestically last week. That is hardly surprising: the US auto industry’s supply and production chains extend beyond national borders so the tariffs would hurt domestic producers alongside foreign ones. Upsetting a key constituency before midterm elections seems unwise, so Mr Trump is probably keen to scrap the duties.
Still, he will want to extract the maximum price for a concession from the visiting EU delegation. This might well explain the show of strength intended in last week’s jawboning lower of the US Dollar[4]. For his part, the wily Mr Junker no doubt understands the US President’s desire to cast himself as a shrewd deal-maker and his appreciation for a splashy photo op.
On balance, that seems to set the stage for a compromise. Such a result is likely to weigh on the anti-risk Japanese Yen easing trade war tensions buoy investors’
