Author: Adam Smith
The current geopolitical environment makes for interesting reading.
The trade war between the US and other major economies is escalating as punitive tariffs are levied on each other’s goods. While economists say the consequences can be contained for now, there are fears that President Trump’s protectionist stance on trade could cause serious damage to the global economy.
Europe, not for the first time, appears to be on the verge of a political meltdown. German Chancellor Angela Merkel’s coalition government nearly collapsed in the first week of July. Italy is governed by a populist left-right coalition that promises tax cuts and spending increases – not a message that would be well received in Brussels. Spain recently changed the governing coalition without even holding a new election.
In Britain, Prime Minister Theresa May has reached several important Brexit agreements by herself but seems unable to win over the backing of her own cabinet much less the Parliament or the European Union. Britain looks like its heading towards a ‘hard’ Brexit – or maybe no Brexit at all.
Despite these concerns and global trade tensions, currency markets seem hardly perturbed with volatility trading at near record lows for all six major currencies (AUD, GBP, EUR, JPY, CHF, CAD) versus the USD.