Trade wars cost growth


The OECD warned today that America's trade wars "threaten a new weakening of activity by undermining investment and confidence worldwide". The organization downgraded its global growth projection this year to 3.2% after a 3.5% expansion in 2018. US growth is expected to slow from 2.9% to 2.8%.

There was a hint of slowing growth in the Chicago Federal Reserve's national activity index yesterday, which fell from 0.05 to -0.45 in April on a scale where zero represents trend growth. It was the only statistic with any direct influence on the USD and it went almost unnoticed.  


The euro zone had nothing to say for itself this morning. The only statistic on today's list is the European Council's barometer of consumer confidence. In the OECD's economic projections, growth in the euro zone is put at 1.2% this year and 1.4% in 2020: for Germany the numbers are 0.7% and 1.2%.

It was a slow-moving day for the euro, which remained within a narrow range and is all but unchanged against the USD.


Canadian economic statistics were no more numerous than European ones and the CAD's range was just as tight as the EUR's. Careful scrutiny reveals it to be 0.1% higher on the day against the USD.

The OECD sees Canadian economic growth slowing from 1.8% in 2018 to 1.3% this year. A 2.0% expansion is projected for 2020.


Economic growth in Britain is likely to remain subdued, according to the OECD. From 1.4% in 2018 it is projected to slow to 1.2% this year and 1.0% in 2010. The only statistic to corroborate that view this morning was the CBI's Industrial Trends Survey, which fell five points to -10.

Bank of England deputy governor Ben Broadbent gave a speech yesterday in which he discussed the dampening effect of Brexit. Although he was speaking in the context of capital investment his argument applies also to  currency: "A repeated series of cliff-edges, each of which is expected to be decisive but in reality just gives way to the next cliff, is more damaging for investment than if it had been clear at the outset that the process will take time." Whether by coincidence or otherwise, sterling moved lower during the 90 minutes after Mr Broadbent began his speech. It is 0.4% lower on the day.


There were no statistics  from Japan overnight and nothing from the Bank of Japan or its leaders. Despite Monday's GDP data the OECD sees growth slowing from 2018's 0.8% to 0.7% this year and 0.6% in 2020.

The pattern of movement for the JPY was similar to the previous day; early strength followed by a steady weakening and a modest recovery in the early European session. It is unchanged on the day against the USD.

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