ECB keeps its nerve as Trump ramps up global trade tension

The ECB is refusing to blink. Even as Donald Trump threatens to slap a 30% tariff on imports and crank up global trade tensions, the European Central Bank decided Thursday it wouldn’t react just yet.

They’re locking rates at 2% and postponing any cut in borrowing costs. The move comes right before their seven-week summer break, with policymakers clearly choosing to wait and see if Trump’s threats actually turn into pain before they make a move.

The logic is simple: don’t rush. A lot of officials are about to disappear on holiday. They’d rather keep repeating that inflation is on target, park any panic until the next batch of economic projections is available for the September 10–11 meeting, and deal with it then.

That means no new action now, but no denial either that things are getting ugly. The euro’s getting stronger, which is hitting exporters and dragging down inflation forecasts. France’s messy budget problems are adding more heat at the worst time.

ECB watches data, ignores panic

Behind closed doors, the ECB knows the pressure is building. A rate cut in September is clearly back on the table, even if they keep hiding behind the usual “meeting-by-meeting” line.

President Christine Lagarde didn’t flinch in her statement Thursday, repeating that “risks to growth are tilted to the downside,” as flagged by Morgan Stanley economists in their preview titled Ready for the Beach. The coming week will pour in the data the ECB needs to weigh that risk.

On Tuesday, their own bank lending survey drops. Wednesday follows with a consumer confidence report, and Thursday will deliver purchasing manager indexes from all across the region, conveniently right before policymakers log off. Germany’s Ifo business confidence and Italy’s economic sentiment numbers wrap the week up on Friday.

Outside the euro area, more inflation data will fly in from Japan, Brazil, and others, while Bank of England chief Andrew Bailey will testify to UK lawmakers about financial stability.His appearance comes just as the UK drops public finance data on Tuesday and faces PMI figures and retail sales later in the week.

Global markets brace as central banks diverge

Over in the US, the economic calendar is light.A Wednesday housing report is expected to show barely any change in the sale of existing homes.

Numbers have been flatlined near a 4 million annualized rate, just slightly better than the 2010 post-crisis low. Thursday brings a report that might show a modest bounce in new home sales, after a brutal drop in June.But the truth is the US housing market is still locked in place.High mortgage rates and unaffordable prices are keeping buyers out.

Meanwhile, Canada’s economic mood gets measured through business and consumer surveys this week. They’ll give insight into inflation fears and investment trends. Retail sales data for May and June could also confirm that shoppers are retreating, especially after tariffs spiked car purchases earlier in the year.

In Asia, everyone’s scrambling to make sense of global trade chaos. South Korea opens the week with export data, followed by confidence and retail numbers. China will keep loan prime rates steady for the second straight month.

Over in Africa, South Africa will show June inflation is likely up to 3.1% from 2.8%, thanks to meat prices. In Nigeria, the central bank will likely keep rates frozen at 27.5%, for the third straight time, with inflation still hot at 22.2%.

In Latin America, Argentina releases its May GDP-proxy Monday. April saw a 1.9% monthly jump and 7.7% year-over-year, helped by President Javier Milei’s move to loosen currency controls tied to a $20 billion IMF deal. Analysts now expect Argentina’s second-quarter GDP to grow 8%, and third quarter by 4.2%, according to Bloomberg.

Mexico is under pressure too. The Tuesday GDP-proxy print will follow April’s surprise strength, and inflation eased in June, finally, and the central bank has hinted it may now slow its easing plans.

Brazil will close the week with its mid-month inflation report, likely down for a third straight time, driven by sky-high borrowing costs. But expectations for 2025 inflation are still above target.

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