Power and its limits

Daily update

Equity markets seemingly rallied on optimistic comments from US President Trump around trade. So much focus on the words of one individual is unusual. Trump has the power to limit future economic damage from new trade taxes, but cannot undo the damage of past policy swings. For example, comments in yesterday’s sentiment data highlighted that companies are delaying decisions in the face of policy uncertainty, even as Trump retreated from some tariffs.
The minutes of the 7 May Federal Reserve meeting are due. This meeting left policy unchanged. The Fed has little choice but to adopt a “wait and see” approach on policy, which risks decisions being taken late. But it is impossible to know where administration policy will land, or how exactly consumers and companies will react to policy volatility.
The ECB survey of inflation expectations is scheduled. French consumer price inflation slowed more than expected yesterday, and lower oil prices suggest perceptions of inflation may be disproportionately lower (fuel prices appeared to help boost US consumer sentiment).
German unemployment data is due—low fear of unemployment remains important to supporting consumption in any economy, and it is notable that German consumers have been stronger than the overall economy. French consumer spending data is also due.