The second half of the year is starting off with a lot of global uncertainty from U.S.-China tariffs to Brexit negotiations and European political risks. The euro is losing the most Monday morning as the divide in Germany’s coalition government widens.
Euro weighed down by German politics
The EUR/USD pair is slipping Monday morning after Germany’s coalitions partners expressed dissatisfaction with the E.U. migration deal reached last week.
German Chancellor Angela Merkel was able to strike a deal on migration during the E.U. summit at the end of the week. However, her coalition Christian Social Union party wasn’t happy with the terms. Interior Minister Horst Seehofer threatened to resign from Merkel’s cabinet and his post as leader of the party.
EUR/USD was trading up around 1.169 at the end of Sunday and has since fallen to 1.160. The U.S. dollar is helped by fears around the impending deadline to impose tariffs at the end of this week.
Tariffs set to start Friday
The storm cloud of a global trade-war is not as far off on the horizon as it once was, with this week marking the official beginning of tit-for-tat tariffs between the U.S. and China. The U.S. tariffs on $34 billion in Chinese imports are set to begin Friday, alongside China’s retaliatory tariffs.
The auto industry is speaking out against the tariffs as the U.S. plans to impose tariffs on auto imports and China plans tariffs on U.S.-manufactured cars. General Motors Co. and BMW AG have both spoke out, urging the Trump Administration to reconsider.
Overall, the dollar is benefitting from the risk-off mood. However, the global view is that the looming tariffs could greatly hurt the global economy.
May to host Brexit “body bag summit”
After no progress was made on Brexit during the E.U. summit at the end of last week, U.K. Prime Minister Theresa May is looking to get her cabinet to agree to what kind of split they want from the E.U.
May will host her cabinet during an overnight meeting at her Chequers country estate July 5 and 6 in order to hammer out how clean of a break they want from the E.U. There is strong division among her Conservative party on the topic.
The meeting is being dubbed the “body bag summit” as the choices for ministers seem to be back the prime minister or resign.
Meanwhile, the GBP/USD is sliding Monday morning on a report that the U.K.’s chief Brexit negotiator told ministers that the there’s no chance of a bespoke deal with the E.U. The pair is down around 1.309 after starting the day around 1.32.