Trade war tweets are theatre thunder

July has seen a number of contradictory statements from Trump about trade policy.

As in so many other matters, the market has gradually become accustomed to a great deal of unpredictability from Trump with regard to trade policy. The assumption seems to be that there will definitely be some form of punitive customs duty on a range of goods, particularly from China. The Chinese response, however, is expected to be moderate and more or less designed to be a symbolic gesture to ensure that the Chinese leadership does not lose face, says Chief Strategist David Bakkegaard Karsbøl in his latest monthly comment.

The EU continues to weaken

Predicting currency movement is generally futile but due to the differences between the U.S. and the European economies as mentioned above, in my opinion the Euro is on its way to being weakened. The yield spread largely favours the U.S. dollar and considering the continued deceleration in the European economy in particular and the difference between levels and changes in the OECD leading indicators for the two regions, it is very difficult to imagine that this picture will change over the next six months.    

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