HomeContributorsFundamental AnalysisUSD In Demand Amid Constructive G20 Meeting

USD In Demand Amid Constructive G20 Meeting

G20 meeting in Osaka prompted optimism all over the place. Major Asian stock markets closed above 2% across the board while European open is set for a rise as well. The greenback, as well as CNY are also gaining traction amid Trump – Xi meeting while the loonie is supported by surging oil prices. The recent up-move in USD is therefore suggesting that expectations of Fed rate cuts are not that certain anymore according to certain investors, as the key reason remained dragging trade issues with China. There is however good reasons to consider that an abrupt change in Fed forward guidance is less likely as issues like inflation, Trump political pressure on Fed or pending trade discords with trade partners stay.

US and China final call at G20 came as expected, as both presidents confirmed that trade discussions are about to resume this week, US tariffs on USD 300 billion worth of Chinese goods is suspended while sanctions on tech giant Huawei, including the authorization to buy US products are removed. Yet the situation is not much different from December 2018 G20 meeting in Argentina when both trading partners confirmed that trade talks would resume, confirming that the recent euphoria should be short-lived. Although relations between US and EU looked positive during the summit, there are good reasons to think that Trump’s battle against trade deficit should finally knock on the EU’s door after a pause in February 2019 when US President Donald Trump promised European Commission President Jean-Claude Juncker not to impose additional tariffs on EU industries, including the automotive industry. Disruptive consequences would have an impact not only on EU producers, but also on the United States, as supply chains remain strongly linked to each other. Furthermore, the release of June headline and core PCE deflator data at 1.50% (prior: 1.50%) and 1.60% (prior: 1.60%) respectively, largely below Fed’s 2% target, tend to favor that a Fed U-turn is less likely. The release of labor data on Friday will therefore play an important role in the Fed’s economic assessment.

Currently trading at 1.1325, EUR/USD is heading along 1.1315 short-term.

Swissquote Bank SA
Swissquote Bank SAhttp://en.swissquote.com/fx
Trading foreign exchange, spot precious metals and any other product on the Forex platform involves significant risk of loss and may not be suitable for all investors. Prior to opening an account with Swissquote, consider your level of experience, investment objectives, assets, income and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not speculate, invest or hedge with capital you cannot afford to lose, that is borrowed or urgently needed or necessary for personal or family subsistence. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Featured Analysis

Learn Forex Trading