Fra Danske Bank:
Summary. Trump’s latest tariff threats are still seen primarily as a negotiation tactic, rather than policy reality. And even if the 100%-point increase against China does take effect on 1 November, the economy would be much better prepared than 6 months ago. We expect the Fed to cut rates in October, but the outlook further ahead is growing increasingly blurry. In between the October and December meetings, a possible trade deal with China, a Supreme Court ruling on Trump’s use of IEEPA tariffs and a shutdown-delayed range of data releases could all significantly alter the outlook.
Macro. If the higher tariff rates on China do take effect on 1 November, the average pre-substitution tariff rate on all US imports rises from around 20% to around 28%. But as trade flows have already adapted to the new tariff landscape, the impact on the post-substitution average rate will be more modest. On the margin, we think that escalating trade war would increase the likelihood of the Fed front-loading its planned rate cuts.
FX. Over the past month, the broad USD has generally traded firmer, with market conviction shifting in favour of the greenback. The tariff escalation announced on Friday underscored two key points: first, that any renewed trade tensions under a Trump administration are unambiguously negative for the broad USD. Second, markets still view the announced measures largely as negotiation tactics rather than policy reality.
STIR. The Effective Federal Funds rate has started to creep higher in the target range – 2bp in recent weeks. It likely reflects shrinking reserve balances, which means the move is likely to continues as the Federal Reserve continues to shrink its balance sheet. It will slightly weaken the pass through of rate cuts.
Hurtige nyheder er stadig i beta-fasen, og fejl kan derfor forekomme.
