Macroeconomics: The Day Ahead for 25 August 2026

Markets Assess Iran Measures, Canada Trade Tensions and Key Data Releases

As markets assess the US isolation measures on Iran and reaction from other nations (most notably China), along with the escalating trade war with Canada, there is a relatively busy schedule of data that features Germany’s Ifo Business Climate and detailed Q2 GDP breakdown, Consumer Confidence from the US, France and South Korea, as well as US House Prices and New Home Sales.

There are the unsurprisingly hawkish RBA minutes to digest, with an expected further 25 bps rate cut from Hungary’s MNB and two speeches on the economic outlook from Richmond Fed’s Barkin also due. The earnings schedules features China Oilfield Services, Great Wall Motor, Hesteel, Jiangxi Copper and Kunlun Energy in China and the first of this week’s run of Canada bank earnings via way of Bank of Montreal and Bank of Nova Scotia.

US Iran Policy and Canada Trade Dispute

US Treasury Secretary Bessent’s plan to isolate Iran economically essentially relies on China and other countries aligning with US policy objectives, which China has rejected consistently, and by extension raises the risk of increasing trade tensions and may even jeopardize the end of September meeting between Trump and Xi. Bessent’s credibility is being steadily eroded, and markets will now await details on the ‘financial initiative’ to start reining in the budget deficit, which he touted last week as a follow-up to his Treasury QE plans. In respect of the reignited trade war with Canada, a cursory look at the attached chart of US trade with Canada, China and Mexico underlines that this outbreak has much more to do with politics and rather little to do with trade imbalances, with the imbalance with Canada rather marginal by comparison with the very large deficits with both Canada and Mexico. While there is still time for negotiations ahead of the September 8 deadline, PM Carney has made it clear (with robust public support) that Canada will not make any concessions to US politically motivated demands (see the story on Commerce Secretary Lutnick’s intervention on Friday) and sees a protracted dispute that could last beyond the November mid-term elections. To be frank, the US is wasting a good deal of political capital on this dispute at a time when its stock of political capital is very low, judging by approval ratings.

Germany – Q2 GDP, Aug IFO Business Climate

The upward revision to 0.3% q/q from the provisional 0.2% looked encouraging, until one looks at the detail, which shows Private Consumption at 0.1% q/q against expected 0.2%, Capital Investment -0.2% q/q vs. expected 0.2% and Government Spending a paltry 0.1% q/q against expected 0.9%, with overall domestic demand at just 0.1% q/q, though there was a welcome solid exports contribution. Despite the much vaunted plans to ratchet up spending on infrastructure and defence, the fact is that on a rolling four quarter basis there has only been one quarter in the past 4 years when Private CapEx was positive (and then only 0.1%). Thus far the ‘trickle down’ impact of government capital spending is nowhere in evidence. A stronger than expected rise in the Ifo Business Climate takes it back to the 2026 high in February, but at 88.8 it signals an economy that is fundamentally weak, even if it does signal some resilience given the high levels of energy prices and all the disruptions from this summer’s heatwaves.

U.S.A. – Aug Consumer Confidence

Consumer Confidence is forecast to edge down to 90.2 from 90.8, with risks to the downside given rising gasoline prices and mortgage rates, a weak job report and the unpopularity of many government policies, above all the war with Iran. A close eye will be kept on the ‘labour differential’ that slipped to its lowest level at 3.1 since February 2021, and as always beware of the often sharp revisions.