ECB: China Diverted Trade To EZ In Trump First Term - ECB Bulletin
The euro area saw imports from China rise around 2-3% of as a direct result of trade tensions between the U.S. and China during president Donald Trump’s first term, according to the ECB's latest economic bulletin, which notes “the effective tariff rate” between the two nations increased by almost 18 percentage points.
The paper shows a significant decline in China exports to the U.S. that led China to seek other markets, in which the Eurozone played an important role, although the impact was bigger in other East and South Asian countries. The increase of flows to Canada and Mexico was slightly less than to Europe.
The euro area couldn’t benefit from these trade tensions by increasing its market share to the U.S, as by the characteristics of goods other Asian nations were the main benefiters, the paper states.
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Historical bullets
BUNDS: German 10yr Yield could target the 2.65% level
- German 10yr Yield sees the 2.65% level close to that 129.54/129.60 resistance area, so far unchallenged,.
- Some likely positioning ahead of the Tariffs announcement later today at 16.00ET, but will be after hours for Europe (21.00BST).
Today, reference 129.41:
- 2.65% = 129.63.
2.60% = 130.15.
EGBS: Citi Retain Long Duration Bias Into Tariff Announcement, Eye IRISH In MT
Citi note that “even after adjusting for fiscal spending, Bunds lag by around 15bp on a regression with a basket of tariff-sensitive EUR equities”.
- They go on to write “into today’s tariff announcement, we prefer bullish/dovish exposure to EUR duration. For EGB spreads, the indifference towards richening Bund swap spreads has tended to be short-lived in the past”.
- “The recent EGB resilience might have been driven by relatively clean positioning, investors waiting for more clarity and prospects of more ECB rate cuts in case of punitive tariffs but ignores their growth implications.”
- As a result, they “retain bearish exposure to periphery spreads into the announcement, with the 10-Year BTP/Bund spread now close to the tight end of its range”.
- At a more granular level, they note that “tariff risks within EMU-11 seem most acute for Germany, Italy, and Ireland while Spain and France seem relatively shielded. This was likely behind the YtD underperformance of IRISH credit, which continued yesterday, despite still-strong fundamentals otherwise. These headwinds are likely to persist for now, although we believe value in the Irish credit is being built for the medium-term”.
FOREX: FX OPTION EXPIRY
Of note:
EURUSD ~1bn at 1.0800.
EURUSD 2.3bn at 1.0800 (thu).
USDJPY 1.19bn at 150.00 (thu).
EURUSD 1.53bn at 1.0800 (fri).
USDCAD 1.19bn at 1.4350 (fri).
AUDUSD ~1bn at 0.6300 (fri).
AUDUSD 1.43bn at 0.6350 (tue).
- EURUSD: 1.0700 (1.11bn), 1.0750 (525mln), 1.0790 (362mln), 1.0800 (972mln).
- USDJPY: 149.80 (278mln), 149.95 (299mln).
- USDCAD: 1.4300 (307mln), 1.4350 (425mln).
- NZDUSD: 0.5775 (427mln).
