25.07 - US-EU deal might be on the way
Eu and USA will sit down for talks on trade tariffs. Markets are frozen, expecting the decision.
As we all know the hottest topic of all the trading talks lately have been the trade tariffs. Trump is acting as if nothing really happened and that he is simply protecting interests of his own country. And we would believe him in case if the tariffs he is imposing on China and EU were not hurting his own economy that is so fiercely trying to protect. Did he really think that he actions, and words would go on unpunished and unanswered?
Of course, EU, like any other alliance would have, prepared some symmetrical answer for USA and it seems that they hit where it hurt because right now they are talking about the possibility for Trump to start discussing his own decisions about tariffs only for the EU to stop their decision on subjecting US automobiles to tariffs. Of course, whatever is tariffed starts bringing less revenue and thus less money go into the federal reserve, so it is very interesting how Trump is going to wiggle his way out of this one.
Of course, he main goal for the Donald right now is to keep his own restrictions and make other courtiers lift theirs. But that is too good to be true, isn't it? And it seems that even American president understands It as his official Twitter account now has the tweet that says "The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!". That means that the meeting will take place tonight and the fact that it is coming to Washington might be an explanation why the markets are so calm today. They are awaiting the decision that the meeting will bring up.
But is it a good idea for Trump to use tariffs as a defense mechanism? Slapping tariffs on every country that is not yours seems too harsh even for Trump. Moreover. It is quite hazardous as greenback is always the one that gets the hardest kicks in the end of the day.
With all the shakes and losses in the markets today one might ask themselves – where is it all going? Where is the future and truth lie? And we think that the stable financial future is hidden in plain sight. We just have to broaden out horizons to see it. Although now it seems that this future is on ruins.
Emerging markets. They are the ones that will suffer the most in case there is a full-blown trade war upon us. Emerging Market Index JPM EM FX fell by 11 percent compared to the highest point that was reached in February. Even though the banks of the emerging economies are trying to stimulate the numbers by financial interventions and rising benchmarks right now it seems hopeless. Investments to the economies of such countries have stopped and it seems that the beg fish of the investment world is not ready to come back to these segments of the market.
Tightening monetary policies are only making things worse even though some of the countries, like China are only loosening them up. And where is the bright future in that? We can answer by stating the following – every war is bound to end sooner or later. In our case it is better that it doesn't start at all but even if it is upon us it will likely end after Trump leaves presidential seat. And that can happen in two years already. After the trade war is over (in case it does come) all these emerging markets that would have been under pressure for several years are going to need additional stimulus from the outside. And that where all the investors and traders come in. Creating financial and monetary flows is going to be the essential part of restoring economies of Emerging countries.
What does that mean for us? Interesting offers and rapid growth if everything goes 'according to the script'. We are especially interested in rapid growth, aren't we? Because USD trading has become so unstable our attention is already turning to other currencies and to exotic ones as well. And in case we spot rapid growth with at least a couple of them, dollar is going to be left with no attention at all. Well... that is a possibility.
We just want to say that emerging market really do nest some of the hope for good and successful trading future and in case you want to be a part of it, it is necessary to start watching them right now.
- by Anna K.