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The Brazilian economy benefited during the height of the U.S.-China trade war. It accounts for more than 80% of total Chinese soybean imports. With this figure, Brazil was able to dethrone the United States as the largest soybean importer. However, the possibility of the two (2) economic powerhouse disagreeing on a trading deal is high. This prompted Brazil to increase its soybean production capacity. However, this opportunity is at the expense of Amazon rainforest. For Brazil to increase its production capacity, the country needs to commercialize its land. However, this might draw some irked from the EU who called out Brazil President Jair Bolsonaro during the G7 Summit. Despite this, the populist leader is expected to continue his agenda. This is expected to give the Brazilian real some strength against the single currency. Germany and France’s PMI results didn’t help the single currency either.
Demand is high for the Brazilian real following allegations that central bank official leaked decisions regarding the country’s interest rate. Reports said the leaks occurred between 2010 and 2012 and is said to benefit an investment fund administered by investment bank BTG Pactual. This report weighted against the U.S. Dollar despite a strong ISM Non-Manufacturing Purchasing Managers Index (PMI). This put the economic indicator to its third year of economic expansion after posting 54.7 result compared to the 53.5 expected. The Brazilian government, today, said it was able to make a revenue of $19.25 billion in privatizations and divestments. Brazil’s right-wing government said it will reduce the state’s footprint in the economy via sales, privatizations, and concessions across a range of sectors. This was amid high hopes of Brazil that loosening its control with its economy will attract foreign direct investment (FDI).
The Romanian Leu is expected to challenge the strength of the U.S. Dollar. This was after Romania’s central bank kept its interest rate on hold. Central bank governor Mugur Isarescu said the unchanged rate of 2.5% was amid expectations that Romania’s actual inflation will remain above its 1.5-3.5% target. The race of central banks towards a negative interest rate had eased pressure for the policymakers in Central Europe to stick to its current monetary policy. In other news, the Trump government received a greenlight to impose tariffs to goods coming from the European Union over the bloc’s decision to subsidize Airbus. The EU is grooming the said aircraft carrier to become the bloc’s flagship and rival U.S. aircraft carrier Boeing. The U.S. is targeting Airbus consortium on its tariffs. The Scottish whisky makers, French cheese makers and Spanish winemakers are the ones affected by the tariffs.
Spain, France, and Germany Services’ Purchasing Managers Index (PMI) was still above the 50 reading. This means that the three (3) largest economies in the European Union, except for the United Kingdom, is still on its expansionary phase. This gave investors relief following a series of global issues that has been dragging the single currency lower. The tit-for-tat trade was between the two (2) largest economies in the world had sent several economies into recession. In addition, the International Monetary Fund (IMF) and the Word Bank lowered their forecast for global growth. In Europe, the European Union is also experiencing some slowdown amid the weakening of Germany. Germany has single-handedly bought the EU up with its strong economy. However, as the country enters the brink of recession, central bank governors are left wondering who could propel the EU economy.