Analyst at Oanda, Craig Erlam –
‘Tariffs are likely to be the main topic of conversation at the G20 meeting at the start of the week after the European Union release details of counter-measures against Donald Trump’s steel and aluminium tariffs. The list totalled around €6.4 billion and will be intended to dissuade Trump from implementing tariffs on the EU, although given what’s been said previously by the US President, further counter-tariffs could be more likely. The question is whether the measures announced by the EU are sufficiently targeted so as to hurt the Republicans in the mid-term elections later this year.’
‘Despite what he says, I’m not sure that a trade war is what Trump actually wants from these tariffs or that he’ll find much support for one within his party. I think the measures were intended to bring certain countries back to the negotiating table and intensify NAFTA negotiations. As yet, it appears other countries are in no mood to be pushed around and if Trump insists on following through on his threats, markets may react more negatively that we’ve seen so far.’
‘The pound is up more than half a percent against the dollar, euro and yen this morning, as confidence grows that a deal on the Brexit transition will be agreed this week. There has been reports that a deal has been close for days and David Davis has today flown to Brussels to meet his EU counterpart Michel Barnier. The hope is that a deal can be agreed ahead of a meeting of EU leaders later this week which will enable both sides to begin talks on the future relationship which needs to be wrapped up later this year.
‘A press conference with Davis and Barnier is believed to have been pencilled in for around midday although this has not yet been confirmed. If this goes ahead, it would suggest a deal has been reached and perhaps it’s the speculation around this that’s leading the pound higher this morning.’