Weekly Outlook 03/06/2019 to 07/06/2019

Germany’s ruling bloc in turmoil

Andrea Nahles, the head of the Social Democratic Party, has decided to resign from her leadership position after the clear defeat in the European elections last week. Given the important role she played in establishing and maintaining the coalition with the Christian Democrats, this departure may impact on the future of the current German government. The main question is whether Nahles’ successor will be willing to keep the coalition alive. If that turns out not to be the case, the Christian Democrats might look out for potential alternatives among the Liberals and the Greens or, instead, lead a minority government. The hypothesis of new elections should not be ruled out either, in which case this resignation could have signaled the beginning of the end of Merkel’s act as Germany’s Chancellor. Christian Democrats are also going through an internal succession crisis and therefore the future of the country’s leadership is now surrounded by uncertainty. The upcoming week should provide us with new hints regarding this process.

Trade tensions go on

A series of new developments have recently escalated global trade tensions and investors and policymakers alike are concerned about the future. Indeed, after the whole Huawei issue, the Chinese government has now blackmailed FedEx Corp. and the US President Trump has threatened Mexico once again with potential tariffs on all its goods. President Trump has also threatened to end a previous arrangement regarding the exports of almost 2000 Indian products to the US. The new week is unlikely to bring significant changes to this trend.

Additional Information

  • On Tuesday, the ECB is releasing figures on the YoY evolution of both CPI and core CPI relative to May

  • On Friday, the US Department of Labor will be releasing new figures for the YoY growth rate of Average Hourly Earnings relative to May

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