Market News & Insights
8 June 2018

‘Tit-For-Tat’ Trump Leaves G7 Early

It looks like US President Donald Trump will be leaving the G7 summit earlier than planned following a frosty reception from global leaders. Claims of dispute between Trump and French President Emmanuel Macron over steel tariffs and trade war fears gained significant momentum. Trump’s decision to cut his visit short follow Macron’s plea for other G7 leaders to confront the US President on trade. Speaking of Trump, Macron stated that “nobody is forever” and “There will no world hegemony if we know how to organise ourselves. And we don’t want there to be one.” The bullish tone has clearly rattled Trump after he cancelled a face to face meeting with UK Prime Minister Theresa May and make his way to Singapore to meet North Korean leader Kim Jong-Un. May has not taken the cancellation personally, instead deciding to defend Trump and advise fellow (for now) EU leaders in stepping back from ‘tit-for-tat’ reactions.

With Brexit negotiations at a stalemate and Europe offering little in terms of trade deals, strengthening ties with Trump via any means seems a priority. In a week with limited economic data to go off EURUSD is gauging its direction off any news headlines on growing tensions between the worlds largest and Europe’s second biggest economies. EURUSD’s weekly range has been 1.53% between 1.1656 lows and 1.1836 highs. Markets will be looking to further developments in G7 disputes for any significant movement today with the current level 1.1766. The dollar has opened brightly being up against every G10 currency other than JPY trading at 109.318 (-0.3%). The euro has eased off on open from yesterday’s rally where we saw EURUSD break 1.18, with EURGBP at 0.877 and EURCHF at 1.1557.

Keeping in theme with global politics, Theresa May’s ‘backstop’ plan on customs after Brexit has offered little inspiration or clarity to both her own cabinet and EU negotiators. May’s hope is to avoid a hard Irish border with the UK temporarily matching EU trade tariffs. May suggested December 2018 as the cut-off date and Brexit Secretary David Davis threatened to resign, only to refuse guaranteeing that the proposed plan will not extent beyond December 2021. Such confusing saw a big sell-off in sterling yesterday, with GBPEUR lows hitting 1.1324 and GBPUSD breaking 1.34 at 1.3379. Sterling is marginally up on open with GBPEUR breaking 1.14 and GBPUSD is holding at 1.3419. G7 and Brexit progress will be today’s main focus with no economic data releases scheduled. Next week offers a contrast to this week’s quiet economic calendar with variety of UK, US and European CPI data due. The FOMC will make their interest rate decision on Wednesday, forecast to remain at 2%. All eyes will be on Thursday’s ECB Conference as markets will look to establish the basis on tapering QE.

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