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Weekend Review: US-Iran Relations on a Tipping Point

On Sunday, the Iranian leader, Hassan Rouhani issued a major warning to the US president. In a speech to Iranian diplomats, the president asked the US president not to continue destabilizing his country. He said, ‘Mr Trump, don’t play with the lion’s tail, this would only lead to regret. America should know that peace with Iran is ongoing saga and war with Iran is the mother of all wars’. In the response, the US president sent a fiery tweet asking the Iranian leader never to threaten the United States again. Just last week, the Iranian government threatened to block oil exports from the gulf states if the US goes ahead with its sanctions on Iranian goods. This week, traders will pay close attention to the ongoing escalation between the US and Iran.

Over the weekend, one of the biggest auto manufacturers in the world replaced its ailing CEO. Fiat-Chrysler Group chairman sent a sad message to the company’s employees announcing that the CEO, Sergio Marchionne would not return to the company. This is after the long-term CEO health continued to decline after going through an operation. This was a blow to the automobile industry as Sergio was a key player. He will be replaced by Mike Manley, a key lieutenant of Marchionne.

On Friday, the US president delivered two major news items. First, he threatened China with tariffs on goods worth more than $500 billion. This would mean that all Chinese goods coming to the United States would be subject to higher taxes. This would be dire because of the volume of goods that come from China. These goods range from apparel to smartphones like the iPhone. It would be a major tax to the US citizens who would be forced to pay more for goods. In addition, the US president sent shockwaves when he criticized the Fed for interest rate hikes. It is unlikely that the Fed will heed to the president’s pleas for lower rates.

On the political scene, the Justice Department released key documents that could shape the political scene this week. Republicans have accused the justice department under Obama for spying on the Trump campaign. Democrats on the other hand have accused the Republicans of attempting to end the Mueller investigation. Republicans accuse the department of not telling the FISA judge that the report on spying of the Trump’s advisor Carter Page was created by a democratic operative.

Over the weekend, the upcoming Mexican president sent a letter to Donald Trump calling for a swift deal on NAFTA. For months, the stalemate between the US, Mexico, and NAFTA has increased as the US president has threatened to exit the agreement. He accuses the other countries of taking advantage of the US. For Canada, he has accused it for its high taxes on American milk. For Mexico, he has accused it for taking American jobs. Traders will wait for indications of what the US-Mexico relations will be under the new president.

On Thursday, the European Central Bank (ECB) will release its interest rates decision. Traders expect it to leave the rates unchanged, but they will listen to the press conference for indications of a rate hike and the end of QE.

On Friday, the US will release its GDP numbers. These numbers are expected to show that the economy rebounded in the second quarter to 4.1%. This will be caused by an increase in consumer spending and the impacts of the tax cuts.

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