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FX Weekly - New USD/CNY forecasts
Tariff de-escalation supports US dollar versus FX majors. This comes at a time when the dollar was already recovering. The recovery could continue, but we expect the long-term downtrend in the dollar to remain in place. We downgrade USD/CNY from 7.80 to 7.30 for end-2025.
Macro Watch - Well, that de-escalated quickly
This morning, China and the US announced a significant de-escalation in the trade war, bringing the bilateral tariffs of 145% (on Chinese exports) and 125% (on US exports) down to 30% and 10% respectively.
The Week Ahead - 12 – 16 May 2025
These are the Key Macro Events for the upcoming week.
Fed Watch - No rate cut in sight
As expected, the Federal Reserve kept rates on hold today, maintaining the upper bound of the federal funds rate at 4.50%. The key update in the policy statement was that uncertainty about the outlook has increased further. Risks of higher unemployment and higher inflation have risen. Powell acknowledged that Trump's tariffs were higher than anticipated but noted that tariff talks are currently in a new phase of negotiations, which could change the picture materially, or not. Powell reiterated that the only response to this level of uncertainty is to wait and see, and that the Fed is well-positioned to react in a timely manner.
The Week Ahead - 5 – 9 May 2025
These are the Key Macro Events for the upcoming week.
Global trade - Frontloading precedes tariff shock
The recovery of global trade and industry seen in early 2025 was helped by trade frontloading in the run-up to higher US import tariffs. Calm before the storm? US import tariff shock will hit global trade, with container bookings into/from US already nosediving, export PMIs falling sharply and IMF and WTO cutting their world trade growth forecasts. Signs of trade frontloading preceding this tariff shock are evident – particularly in tariff epicentre US (shown by a dramatic turnaround of net exports’ contribution to Q1 GDP), but also for China and the eurozone. Evidence for the Netherlands is limited so far. Following the escalation of the US-China trade war, fears of a new China supply shock hitting European markets have risen. However, besides risks, this also creates opportunities for European companies.
US and EZ GDP releases - Not just a frontloading story
US Macro: Import surge exaggerates GDP weakness. Eurozone upside surprise materializes before heading into a US tariff induced slowdown. France disappoints as underlying data looks worse. Germany solid start to the year moving into trade uncertainty German. Dutch growth slows to 0.1%, partly expected, partly unexpected.
The Week Ahead - 28 April - 2 May 2025
These are the Key Macro Events for the upcoming week.
US - The US has already lost the trade war
One of the primary objectives of the Trump administration’s (trade) policies is to become less dependent on China, but policy implementation is poorly aligned with overall goals and too erratic. The trade war hurts everyone, but it hurts the US more than other major economic players. The price of China-decoupling is higher than just inflation: the US risks losing control of the global financial system.
Global Monthly - The only certainty is uncertainty
US policy has been erratic, to put it mildly. Tariffs were announced, paused, and then focused on China, but with key exemptions. It is unclear what the Trump administration actually wants. This makes predicting outcomes even harder. With uncertainty the only real certainty, the global – especially the US – economy is the main casualty. But so, increasingly, is the US’s leadership of the global financial system. Spotlight: The US dollar is facing testing times, but the real test is still to come. Despite the pressures it is facing, we still see no viable alternative.