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In March, the mood among German investors worsened, according to a poll uncovered on Tuesday. It definitely reflects soaring uncertainty as for the damage the EU’s number one economy could suffer if American import duties evolved into a fierce trade feud.
Donald Trump has rolled out import duties of 25% on steel as well as 10% on aluminum. The move is going to take effect already this week, on Friday. It has powered worries about tit-for-tat measures, which could spark a global trade dispute and have the economic recovery suppressed.
The ZEW research institute told that its monthly poll pointed out that economic sentiment among investors headed south to 5.1, which is its lowest outcome in a year and a half, versus 17.8 in February. As for the consensus estimate in a Reuters survey, it accounted for 13.0.
Worries over an US-led global trade feud have made analysts more cautious in their forecasts.
The stronger common currency is also affecting the business outlook of German exporters. In general, the outlook for the German economy was still upbeat.
A separate indicator measuring investors' assessment of the German economy's current conditions headed south from 92.3 to 90.7 in February. It turned to be a bit higher than the 90 foreseen in the Reuters consensus estimate.
The country’s economy ministry told that any escalation of Trump's duties on metal imports into a big trade conflict could heavily affect the global recovery. However, the duties themselves should have rather a limited effect.
However, Trump has also issued a warning that the European Union would get hit with a huge tax of 25% on their vehicles for not treating American in the proper way when it comes to trading.
Market experts tell that a full-blown trade conflict between Europe, China and the United States could ramp down economic surge in Germany by 1%.
The risk sentiment remains under pressure after the comments by China about the countermeasures against the US tariffs. Thus, the AUD/USD and the USD/JPY pairs will be under our attention.
During the European trading session, both the US and the UK yield curves inverted.
Levels for Wednesday's trading
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