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LGT Navigator: Clouded global economic climate

August 10, 2018

In a recent survey by Munich-based Ifo Institute, the global economic climate clouded again in the third quarter of 2018 given the escalating trade dispute. The relevant index fell from +16.5 to +2.9 points, roughly back to the level of the first quarter of 2017, with expectations in particular again falling sharply from +6.1 to -10.6 points, the lowest level since the end of 2011, with the economic climate deteriorating in almost all regions and the associated drop in expected global investment activity.

The ECB's cautious bias toward an interest rate turnaround, despite the announcement to end its billion-dollar bond purchase program probably at the end of this year, weakened the euro significantly. The ECB maintained its key interest rate at a record low and remained extremely cautious in its communication. At the same time, the Bank of Japan also left its key interest rates unchanged and even lowered its inflation expectations.

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