Eurozone inflation to stabilise at the 2 per cent target of ECB
Eurozone inflation could be a touch higher this year than earlier thought but will then stabilise at the European Central Bank's 2 per cent target, the bank's Survey of Professional Forecasters showed on Tuesday.
The ECB cut interest rates for the seventh time in a year on Thursday, arguing that disinflation was well on track and risks were on the rise that price growth comes even lower than earlier thought.
The ECB's survey, often a key input into policy deliberations, showed 2025 inflation averaging 2.2 per cent, above the 2.1 per cent predicted three months ago while the 2026 number was lifted to 2.0 per cent from 1.9 per cent.
However, these numbers may be less significant than in the past since the ECB's cut off for collecting projections was April 4 and financial markets have shifted significantly since then due to the US's erratic trade policy.
The euro has firmed sharply against the dollar and energy prices have fallen, changes that could significantly slow inflation.
Trade barriers and tensions with the US could also sharply slow economic growth and weigh on prices.
The survey, however, only showed a small revision in the growth outlook, putting the 2025 expansion at 0.9 per cent versus the previous 1.0 per cent number, suggesting that not all of the trade tension is yet factored in.
ECB President Christine Lagarde earlier argued that a full trade war could deduct up to 0.5 percentage point of growth.
Eurozone government bond yields steadied on Tuesday as traders returning from the long weekend reassessed their outlook for the economy after the European Central Bank's rate decision on Thursday and comments that US tariffs would knock growth.
Investors were also digesting US President Donald Trump's Monday warning that domestic growth could slow unless the Federal Reserve cut interest rates immediately, which triggered a sell-off in long-dated Treasuries.
German 10-year bond yields, the benchmark for the Eurozone bloc, inched up 0.5 basis points to 2.47 per cent. Italy's 10-year yield was 1.4 basis points higher at 3.66 per cent.
Trump repeated his criticism of Fed Chair Jerome Powell, who says rates should not be lowered until it is clearer Trump's tariff plans won't lead to a persistent surge in inflation.
The spread between US 10-year Treasuries and German Bunds widened to 195 bps. The premium investors demand to hold US debt rather than German has increased by 48 basis points so far in April, heading for its biggest monthly rise since June 2003, according to LSEG data.
Germany's two-year bond yield, which is more sensitive to ECB rate expectations, extended its slide on Tuesday, falling by 2.9 bps to 1.64 per cent.
It dropped about 7 bps on Thursday after investors priced in more rate cuts by the ECB after the central bank lowered interest rates to 2.25 per cent last week.
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Arabian Post
2 hours ago
- Arabian Post
U.S.-China Trade Talks In London Form The Basis Of Early Agreement On Contentious Issues
By Nitya Chakraborty The high level delegations of United States of America and China concluded their two day trade talks in London on Tuesday agreeing to take forward the course of negotiations for further promoting steady and healthy development of economic and trade ties between the two largest economies of the world. Both Chinese and U.S. sources underlined that the London talks were based on the guidelines set through phone conversations between President Trump and President Xi Jinping on June 5 as also the understanding arrived at the earlier meeting in Geneva last month. In fact following the Geneva meeting last month, the Chinese side made lot of complaints that the U.S, agencies have been violating many of the principles agreed to at the Geneva meeting and this was hampering the proper implementation of the Geneva understanding. Chinese President's office communicated this to the President Trump's office and finally Trump spoke directly to President Xi Jinping on June 5 and discussed a few guidelines for trade discussions scheduled in London on June 9 and 10. Now this London agreement based on that June 5 guidelines set by the two Presidents will be taken forward for further finetuning at the next meeting to be scheduled soon. U.S. sources say that the areas of discussions are so vast and the items are so many that a full fledged deal will take a few more sources have hinted that the Trump administration is really keen in arriving at an early deal with China. So, the U.S. side will abide by the London agreement in the interests of normal trade relations between both the countries. According to a latest survey released by the American Chamber of Commerce in China, although tariffs pose rising challenges to US companies in China, most companies are not planning to exit China, with none reporting shifting production back to the US. Chinese sources say that China is maintaining strategic patience in talks with the U.S. officials as there are some structural trade conflicts and these require time consuming discussions. On Monday morning, China released the trade data for the first five months of 2025. China's total goods imports and exports in yuan-denominated terms rose to 17.94 trillion yuan ($2.5 trillion) in the first five months of 2025, up 2.5 percent year-on-year, official data showed Monday. The continuous growth in foreign trade underscores the resilience of the world's second largest economy, with supply chain and industry chain remaining competitive in response to the world market demand, despite global headwinds highlighted by unilateralism, a Chinese expert said. 'Since the beginning of this year, China's economy has continued to recover and improve. Under external pressure, the country's goods trade has maintained strong resilience. By May, China's imports and exports continued their growth trend, with the growth rate accelerating notably after the high-level China-US economic and trade talks,' said Lü Daliang, a GAC spokesperson, Xinhua reported on Monday While China's foreign trade generally saw a positive growth, uncertainties remain, as reflected in some trade figures. Media reported that last month, goods exports rose 6.3 percent year on year, while imports went down 2.1 percent. China-US trade decreased by 8.1 per cent year on year basis to1.72 trillion yuan during the first five months of 2025, according to Chinese customs data. Li Changan, a professor at the Academy of China Open Economy Studies at the University of International Business and Economics, told the Global Times on Monday that data from May shows that while China's foreign trade remained generally stable, some fluctuations did occur, likely linked to the trade tensions. 'China's import and export growth accelerated significantly following recent high level trade talks between China and the US in Geneva. This suggests a rebound in foreign trade after the joint statement, partially offsetting the negative impact of the trade dispute and helping maintain overall trade stability,' Li said, adding that challenges persist as businesses expect more predictability in world trade. The trend in China-US trade data was 'expected,' as even though China and the US reached an agreement to significantly reduce reciprocal tariffs during the Geneva talks in May, US tariffs on Chinese goods remain high, prompting Chinese foreign trade companies to made adjustments by exploring alternative markets to reduce their reliance on the US, Huo Jianguo, a vice chairman of the China Society for World Trade Organization Studies in Beijing, told the Global Times on Monday. The United States and China have a substantial trade relationship, with China being a major trading partner and a significant export market for the US. In 2024, total US-China trade in goods reached an estimated $582.4 billion, with US exports to China at $143.5 billion and imports from China at $438.9 billion, resulting in a trade deficit of $295.4 billion. China is the third-largest export market for the US, behind Canada and Mexico. It is interesting that Chinese policy makers are making special efforts to woo the European Union in both political and trade areas by taking advantage of the current fissures in US-EU relations. The idea is to project China as a defender of multilateral trading as also WTO norms as against the unilateralism being followed by the US President Donald Trump. However, there have been many setbacks to China-EU relations also. This month, the EU has taken steps to restrict Chinese medical devices from participating in its public procurement market, which was firmly opposed by the Chinese side. Recently, negative hype against China has increased in Europe. Following the 'China spy' case and the so-called lobbying scandal related to Huawei, the Czech Republic openly accused China of launching a cyberattack against it, and the EU and NATO followed suit. Even after a major power outage in Europe, solar power inverters produced in China were questioned by some for 'cybersecurity risks.' In the recent days, China and Europe have conducted intensive diplomatic interactions. President Xi Jinping spoke with French President Emmanuel Macron and German Chancellor Friedrich Merz respectively, Vice Premiers He Lifeng and Liu Guozhong visited Europe successively, the Danish and Dutch foreign ministers visited China successively, and Foreign Minister Wang Yi spoke with the German and Polish foreign ministers. Vice Premier He Lifeng is currently in London on an official visit to the UK. He will be having intensive discussions on trade and political issues with the British Prime Minister Keir Starmer. The European Parliament and China have decided to simultaneously and comprehensively lift restrictions on mutual exchanges, further sending a positive signal for expanding exchanges between the two sides. It's reported that European Council President Antonio Costa and European Commission President Ursula von der Leyen will also visit China in July to hold meetings with Chinese leaders. Chinese experts say that such setbacks are not unexpected taking into account the policies of EU members but still cooperation and collaboration are possible. China is interested in that. Over the past 50 years since establishing diplomatic relations, China and the EU have formed a strong economic symbiotic relationship, with annual trade increasing from $2.4 billion to $785.8 billion – a growth of over 300 times. Both sides have engaged in productive multilateral coordination and cooperation in areas such as climate change. Both Chinese and EU sources say these collaborations have not only brought tangible benefits to nearly 2 billion people on both sides but have also made significant contributions to maintaining global stability and prosperity. In the current complex international situation, the China-EU relationship holds even greater strategic significance and global influence. The Chinese perception is that the development of China-EU relations demonstrates that the two sides can fully respect each other, engage in equal dialogue, complement each other's strengths, and achieve mutual success. The world is changing, but the fundamental fact that cooperation between China and the EU far outweighs competition, that consensus far exceeds differences, and that opportunities far exceed risks remains unchanged. (IPA Service)
Middle East Eye
4 hours ago
- Middle East Eye
US embassy in Iraq prepares for partial evacuation ahead of Iran talks
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Middle East Eye
4 hours ago
- Middle East Eye
How Turkey and Qatar are playing an outsized role in Trump's new Middle East
Turkey and Qatar are making themselves crucial to US President Donald Trump's reshaping of the Middle East. Look no further than in Syria, where Qatari gas and cash, along with Turkish military might, are helping war-ravaged Syria back on its feet while Trump tries to fulfil his promise to pull the plug on western interventionists and 'nation builders'. The two countries' rising stock is not going unnoticed among Arab officials. 'Trump has too much on his plate; China, Iran talks, the war in Ukraine. He doesn't want to intervene. In Syria, he has these two local allies who don't mind getting involved in the nitty-gritty details of Syria's reconstruction. He is going to lean on them,' one senior Arab official told Middle East Eye. Qatar and Saudi Arabia are paying the salaries of Syrian government employees. In March, Qatar began supplying gas to Syria via Jordan. Meanwhile, Turkey's government is in talks with Damascus on a defence pact amid Israeli air strikes in Syria. New MEE newsletter: Jerusalem Dispatch Sign up to get the latest insights and analysis on Israel-Palestine, alongside Turkey Unpacked and other MEE newsletters That Turkey and Qatar are the regional powers most active in Syria should not come as a surprise. Turkey shares a long border with Syria and was the last true backer of rebels who fought to oust Bashar al-Assad after most Gulf monarchies gave up on their cause. Qatar was the exception. It was the sole Gulf state to recognise and host Syria's opposition. Conversely, the UAE made a big bet on rehabilitating Assad. MEE revealed that the UAE was negotiating a grand bargain to lift US sanctions on Assad in return for reducing Iran's influence. The talks continued up until the last minute. Assad was toppled in an offensive led by Hay'at Tahrir al-Sham, whose commander, Ahmed al-Sharaa, is Syria's new president. The biggest deal Turkey and Qatar have made in Syria so far was in May. US ambassador to Turkey Tom Barrack assumes Syria envoy post Read More » Along with the US, they signed a $7bn energy agreement that envisions the three countries building four gas power plants in Syria and one solar plant to boost the war-ravaged country's meagre energy supplies. Qatar's UCC construction and energy company, owned by the prominent al-Khayyat family, is set to lead the project. Speaking in Damascus at the signing ceremony, US envoy to Syria Thomas Barrack took the opportunity to praise the 'alignment of these amazing countries". 'A young and prosperous Qatar, one of the most incredible and ancient civilisations in Syria; [and] one of the most dominant empires that ever existed in the Ottoman Empire and the succession of Türkiye.' Barrack framed Syria as the poster child for Trump's vision of a Middle East, where the US was empowering local countries to redress the wrong of Sykes-Picot, the agreement that colonial Britain and France used to divide Syria during WWI. 'That mistake cost generations. We will not make it again,' he wrote on X. 'Need to address the PKK' If there is any doubt about whose voice the US will give the most credence to in Syria, look to Ankara, where Barrack also serves as Trump's ambassador to Turkey. 'The Trump administration understands the Turks have a vital national security interest in Syria. He respects that in a way others in Washington haven't,' Robert Ford, the last US ambassador to Syria, told MEE. 'The US has to work with the Turks otherwise, there will be another war' - Bassam Barabandi, former Syrian diplomat and opposition activist During the Biden administration, Syria was a sore point in US-Turkey ties. US troops first entered Syria in 2014 to fight the Islamic State militant (IS) group. They partnered with the Kurdish-led Syrian Democratic Forces (SDF). Turkey views the SDF as an extension of the outlawed Kurdistan Workers' Party (PKK). The PKK has waged a decades-long guerrilla war in southern Turkey and is labelled a terrorist organisation by the US and the European Union. 'You can't have a stable Syria without addressing the PKK. The US has to work with the Turks, otherwise there will be another war,' Bassam Barabandi, a former Syrian diplomat and opposition activist, told MEE. During his first term in office, Trump tried to withdraw US troops from Syria. His own officials hamstrung him, and his former defence secretary, Jim Mattis, resigned over a partial troop withdrawal. Although US troops were ostensibly in Syria to fight IS, they came to be seen as a force denying territory to Iran. With Tehran's ally Assad gone, that rationale no longer exists. Trump himself says Turkey has 'taken over Syria', alluding to its close ties to Sharaa. He appears to sense this as his chance to withdraw troops, despite pleas from Israel and the SDF to keep them there. Barrack told Turkish media in June that the US planned to downsize from eight bases to one in northeastern Syria. How Trump's allies view Turkey and Qatar Turkey and Qatar have long been seen as close partners. In a sense, they complement each other. Turkey has the second largest army in Nato, but is cash poor. Qatar is one of the world's top exporters of Liquefied Natural Gas, but has just 300,000 nationals. Turkey has a military base in Qatar. Doha made tens of billions of dollars in investments in Turkey during its inflation crisis, providing Turkish President Recep Tayyip Erdogan with an economic lifeline. The two countries' alignment was solidified during the 2011 Arab Spring, when they backed popular protests against rulers like Assad in Syria and Hosni Mubarak in Egypt. Saudi Arabia and the UAE accused them of supporting political Islamists who Abu Dhabi and Riyadh feared would unsettle their monarchies. The rift got nasty in 2017, when a Saudi-led blockade was imposed on Qatar. That Trump should welcome Qatar and Turkish investment in Syria now shows how rapidly the region has reorganised itself. In 2017, he gave a White House speech throwing his weight behind the blockade. Until recently, Trump's Middle East director at the National Security Council was Eric Trager, who has been critical of Qatar. 'You certainly have those in the administration, not the Witkoffs or Barracks, who still believe in a Muslim Brotherhood boogyman. This is deep-seated. So it's interesting to see Trump's really close cohort move beyond this,' Natasha Hall, a Syria expert at the Center for Strategic and International Studies (CSIS, )said, referring to US Middle East envoy, Steve Witkoff. Both of Trump's close advisors enjoy good relations with Qatar, Saudi Arabia and the UAE. The UAE's hotspot troubles The Arab Spring descended into a slew of conflicts, of which Syria was just one. After the Nato-led removal of Muammar Gaddafi in Libya, Turkey backed a government in Tripoli while Saudi Arabia and the UAE threw their support behind a rogue general and one-time CIA asset, Khalifa Haftar. The UAE also backed Egyptian President Abdel Fattah el-Sisi, the general who overthrew the democratically elected president, Mohammed Morsi, whom Erdogan backed. Turkey and Qatar's growing clout in the Middle East vis-a-vis Syria contrasts with mounting troubles for the UAE in some of these hotspots. UAE lobbying Trump administration to reject Arab League Gaza plan, officials say Read More » Ties between Egypt and the UAE are becoming seriously frayed, although both sides are trying to downplay it, Arab officials tell MEE. Sisi's economy is in crisis, but he has failed to push through the reforms that the UAE, his top backer, wants. The Emiratis have lobbied against Cairo in Washington, MEE revealed. The UAE's ambassador to the US publicly backed a plan floated by Trump to forcibly displace Palestinians from Gaza - a thought that unnerves Egyptian generals. Libya remains divided. Haftar's bid to conquer Tripoli failed in 2020. His son and likely successor, Saddam, has even courted Turkey and Qatar as their power rises. He visited Doha and Ankara this year. The parliament in Eastern Libya controlled by him is weighing whether to agree to a contentious maritime deal that Turkey favours. As Turkey and Qatar sign energy deals in Damascus under US auspices, the UAE is bogged down in a brutal civil war in Sudan. There it is backing the paramilitary Rapid Support Forces (RSF) against the Sudanese army, which is backed by Turkey, Egypt and Iran. Litmus test Syria is going to be a test case as the first post-Arab Spring country to be rebuilt after the 2021 al-Ula agreement, in which the Gulf states agreed to put their differences behind them and mend fences. Qatar and Saudi Arabia have patched up ties, but the Qataris and Emiratis still have a chilly relationship. The same goes for the Turks. 'Syria's greatest benefit is that Assad was ousted after al-Ula,' a Syria analyst in the UAE told MEE, speaking on condition of anonymity. Trump announced in Saudi Arabia that he was lifting all US sanctions on Syria, and he credited both Erdogan and Crown Prince Mohammed bin Salman with convincing him to do so. 'The Saudis have been just as instrumental as the Turks and Qataris, if not more, in convincing Trump to drop sanctions on Syria. They want a stable Syria in order to focus on their own economic development at home,' Anna Jacobs, a non-resident fellow at the Arab Gulf States Institute, told MEE. 'The new Saudi looks for interest, not emotion or ideology,' Barabandi told MEE. 'They are with Turkey and Qatar on Syria. The US's goal is to facilitate the flow of GCC money into Syria. That's it.' Even the UAE is stepping in and trying to gain influence. In May, state-owned Dubai Ports World signed a pledge to invest $800m to modernise the port of Tartus. The analyst in the UAE said Sharaa's government welcomed the UAE's investment in Tartus because it needed a country that was seen as agreeable to Russia, which still has a military base there. France's CMA CGM shipping inked a 30-year deal to operate Latakia port in Syria. 'Sharaa couldn't have Turkey or a European state come in. Russia would have complained about that. The UAE is a friend of Russia,' the analyst said. The UAE's Al Habtoor group, a massive conglomerate that spans real estate to the automotive industry, is set to send a delegation to Syria this week. Ford said that Turkey, Qatar, the UAE, and Saudi Arabia all have a convergence of interests in Syria to ensure its transition is stable, and Iran, Assad's old patron, stays out. 'I'm not saying Abu Dhabi is comfortable with a conservative Islamist in power, but they all want to see Sharaa reduce Iran's influence,' he said. No nation-building The UAE, which has the closest ties to Israel among Gulf states, also brokered secret talks between Syria and Israel, Reuters reported in May. Israel pummelled Syria after Assad's removal and has sent troops to occupy a swath of the southeast, south of Damascus. MEE previously reported that the US lobbied Turkey and Israel into deconfliction talks. 'I think the Emiratis, and other Gulf states' number one concern is that there not be an outbreak of violence between the Turks and Israelis in Syria or the Iranians and Israelis,' Ford said. Syria after Assad: Sharaa's delicate balancing act with Israel Read More » He said while Turkey and Qatar have stepped up in Syria, it's a leap to say the US is recognising it as a sphere of their influence. 'That is too nineteenth century,' he said. 'The Trump people don't object to Turkey and Qatar getting involved in Syria. But they don't object to the Saudis and Emiratis getting involved either. Ultimately, the goal is for commerce between Israel and Syria.' Still, regional officials say Sharaa's ascent to power has bolstered Turkey and Qatar's power in the Levant. 'Sharaa will take Emirati money, but he won't trust them with security,' the Arab official told MEE. 'The UAE is on their back foot.' However, the real change is that Syria is not talking about elections. 'Sharaa has gone out of his way to prove that he won't be part of any political Islamist movement beyond Syria's borders,' the UAE-based analyst said. 'And he isn't mentioning democracy.'
