The world leaders from the top 20 nations are gathering in Osaka, Japan. They are gathered to discuss such weighty issues as the global economy, trade and investment, innovation, environment and energy, and employment. Unfortunately, their input and efforts will be overshadowed by United States President Donald Trump.
Trump tends to hijack Global summit meetings and make them all about him and his agenda. The Osaka G-20 has already suffered the same fate. The spotlight is on Trump and Chinese President Xi Jinping. They are meeting on Saturday, and as a sign of good faith, Trump agreed to delay the imposition of new tariffs. No one expects a trade deal to be signed following the meeting, but hopes are high that the trade discussions will resume, raising the odds that an agreement will be reached.
Trump is upset with India and its trade practices. Trump is shocked at the audacity of India to react to his tariffs by imposing tariffs of its own. India raised duties on 28 U.S. products after the Americans withdrew free tariff entry on some Indian goods.
The FX market traded with a mildly risk positive tone overnight and continued that theme in early Toronto trading this morning. The Canadian dollar is consolidating yesterday's gains and traded in a narrow range.
The renewed U.S./China trade optimism underpinned the Australian and New Zealand dollars which opened in Toronto, slightly firmer from where they closed. Prices are further supported by reports that portfolio managers may need to sell U.S. dollars for month-end, quarter-end, and half-year end, re-balancing purposes. That’s because the major U.S. equity indices have had a good month and as of yesterday were up over 3.5%.
FX trading was choppy, and the ranges were narrow during the European session. EUR/USD suffered after a spate of euro-zone data was weaker than expected. The data supports European Central Bank President Mario Draghi’s view that the weak euro-zone economy needs more stimulus. However, broad U.S. dollar weakness due to month-end selling pressures supported prices.
The British pound is torn between selling due to no-deal Brexit fears and buying on the back of month-end demand. British Prime Minister-wannabe Boris Johnson told reporters today that the odds of a "no-deal" Brexit were a "million to one." GBP/USD got a modest boost from the remark up until traders remembered the day before he said the U.K. would leave the EU on October 31.
There is a lot of U.S. data today including pending home sales, Q1 gross domestic product and jobless claims. Traders and Federal Reserve Chair Jerome Powell will be "closely monitoring" the reports.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
