The foreign exchange markets traded uncharacteristically subdued on Thursday, ahead of what’s set to be one of the most important G20 Summits in recent times.
The pound and euro were both confined to 40pip ranges against the US dollar yesterday with markets treading water before what could be an explosive few days of market-moving headlines. Before the G20, we have the issue of month and quarter-end re-balancing across currency markets. US stock markets have surged the last 5 weeks, implying the large USD inflows may have to be re-balanced. As a result, we could see a day of significant volatility. In addition, Friday’s trading session will host a number of tier 1 economic data releases. First up, UK 1st quarter GDP will see its 3rd and final revision. No change is expected at 0.5%. Next up, Eurozone flash consumer price index is set for release at 10am. After Mario Draghi’s (ECB President) speech at Sintra recently, where he essentially stated the central bank will do whatever it takes to stoke growth and inflation, many will be observing this report to gather whether his words will need to turn into actions or not. Later in the day we’ll have inflation and consumer confidence numbers from the US.
Over the weekend, all eyes will be firmly focused on the G20, in particular the meeting between Trump & Xi. It’s likely the outcome will be perceived in a binary fashion, i.e. positive and markets rejoice with stocks surging and risk-on currencies benefiting, or negative and the reverse occurs. After all the harsh rhetoric the bar is set high for a favourable outcome this weekend. Please note, Sunday evening opening FX prices could see some big gaps depending on what’s said and who says it!
Enjoy the weekend.
Written by Viv Savani. 9:01am, June 28th 2019
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