Trade Tensions Weigh on Equities, Lift Yen

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Rising trade tensions are taking a toll on equity markets.  No relief is in sight, though some still are hoping that a breakthrough is possible before the US-Chinese sanctions are implemented on July 6.   Merkel’s work is cut out this week after a push-back against the Berlin-Paris agreement and strong opposition to the current immigration stance.  The US dollar is mostly firmer, though the yen is the strongest.  

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A Change Under Foot in Europe

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Europe remains a work in progress and it grows through crisis.  The political crisis in Europe is spurring new reforms and institutional capacity building.  Monetary union was the driven by one overreaching challenge, what do with a reunified Germany.  Forgetting the roots of EMU leads to misguided assessments.  

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Renewed Confidence in Divergence

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The diverging paths of the major central banks remains a powerful driver in the foreign exchange markets, and the capital market more broadly.  Although last year’s dollar sell-off was thought to be the beginning of a new paradigm, one of convergence, it is clear after the recent central bank meetings that peak divergence is still at least a year away.  

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