South Korean government trims 2018 GDP growth forecast to 2.9 pct, CPI inflation to 1.6 pct

South Korea’s government has trimmed its forecast for the country’s gross domestic product (GDP) for this year to 2.9 percent, from its December projection of 3.0 percent, and also lowered its consumer price inflation forecast to 1.6 percent from its earlier estimation of 1.7 percent, owing to ongoing U.S.-China trade tensions and a slowdown in facility investment.

Further, the Bank of Korea (BoK), in its monetary policy meeting last Thursday, slashed its growth forecast for 2018 to 2.9 percent from its April estimate of 3.0 percent, while maintaining its inflation prediction at 1.6 percent for this year.

Regarding the development in the U.S.-China trade scenario, reports from Politico claimed that White House National Economic Council Director Larry Kudlow said Chinese President Xi Jinping is showing no signs of wanting to compromise on US trade demands and said the onus is on Beijing to try to reach a deal.

Kudlow also said he has been told that European Commission President Jean-Claude Juncker will bring a "very important free trade offer" when he visits US President Donald Trump in Washington next week.

Meanwhile, the USD/CNY has potential to scale further upwards, subject to any news of additional imposition of tariffs on China by the United States by the end of this month. However, the South Korean won will continue running an increasingly tight correlation with the CNH, while remaining susceptible to the Fed’s monetary policy stance, ongoing US-China trade war and geopolitical situation on the Korean Peninsula, Scotiabank reported.