The G20 Summit has begun today on the last day of November, although forex traders have been waiting for it for weeks, while the financial markets have been waiting for a few sessions, since the price action in most markets has been slow compared to previous weeks and it has been mainly adjustment before the summit. I have seen some of the official priorities which include:
- the taxation of the digital economy
- the future of work
- infrastructure for development
- food security
- gender equality and women’s empowerment
But, we know that the issues to be discussed on this G20 summit are other. One thing is for sure, this is a summit between Donald Trump and everyone else. Forex traders have been trading these issues for months now, so you must be aware of the real issues to be discussed this weekend, especially if you have followed us during this time, so here we go.
This has also been called the Trump-Xi summit by some economists because this is the main global issue right now. It is also very important for forex traders since the outcome from this summit regarding the issue impacts financial markets greatly and many economies of the globe. It impacts the Chinese economy and therefore the AUD and the NZD, since Australia and New Zealand are tightly connected to the Chinese economy because China dries up most of their exports.
We have heard some comments from both parties which sound optimistic so far. Donald Trump said earlier that there are some good signs ahead of the meeting with China’s President Xi, adding that he is working hard to make a deal with China. A Chinese official at the summit also responded with comments such as the points of consensus on trade between US and China are rising but there are still some disagreements. Nothing new so far, but let’s see how it ends.
Oil Prices and OPEC
Oil prices have been declining considerably this year, losing about a third of their value during this period. Donald Trump has played a role on this, asking Saudi Arabia in particular to keep producing Oil which they have done, although we don’t know if this is all their production or whether they have been tapping on their Oil reserves to please Trump. That’s the reason why Donald Trump has been pretty soft on Saudi Arabia, particularly for the Khashoggi murder in the Saudi embassy in Turkey by some Saudi Crown Prince agents.
On the other hand, the global economy has slowed this year apart from the US economy, so demand has declined as well. OPEC+ has been trying to talk Oil higher recently and they are holding a meeting in Vienna this weekend at the same time as the G20 Summit, while Putin is in Argentina. They are talking of cutting production by around 1.3 billion barrels per day. Oil has bounced around $2, with WTI being below $50/day at some point a few days ago. Probably Trump will talk about this with Putin.
Immigration will be another issue to be addressed at this summit. The influx of immigrants into Europe and the US is not as massive as it used to be a couple of years ago, but it still remains an issue which I’m sure the leaders will discuss in this G20 summit. They might not discuss everything officially, but there will be talks behind the curtains for sure.
Mainstream leaders and political parties across Europe and America have been going out of fashion pretty quickly and the political and public landscape is reshaping, so there is concern. Trump is an outsider, Brexit is an anomaly and European leaders such as Merkel and Macron are set to lose next elections. We have new politicians leading Italy, Austria and Poland.
US Car Tariffs
The White House administration has applied tariffs to other countries besides China and they are planning on imposing tariffs on cars, which will attempt to target European cars. They are supposed to come into effect really soon, some EU officials expect them as soon as December or January Next year. But, the EU representatives Juncker and Tusk, as well as some EU leaders (not Merkel, Trump hates her) such as Macron will negotiate this issue and try to find a solution with Donald Trump, but I doubt they will convince him to drop the auto tariffs that he has planned.
This one has already been taken care of. The USMCA agreement or the new NAFTA has just been signed among the US, Mexica and Canada. Not sure if the lower-ranking officials or the leaders signed it because there was a bit of confusion about this earlier. Another confusion is the fact that Canada wanted to call it CUSMA, perhaps to be able to read it easier. Anyway, it leaves out the Steel and Aluminium tariffs that the US has imposed on Mexico and Canada, which seems like the latter two have backed down on this issue.
The Russia-Ukraine conflict has precipitated once again with the Russian aggression on some Ukrainian military ships, which Russia claims to have entered the Russian maritime zone. Ukrainian officials have been held in custody in Russia. We know that Donald Trump wants to get tougher on Russia with sanctions and other things, such as opposing a Russian gas pipeline which is planned to be built at some point to supply Europe and Germany in particular with liquid gas.
On the other hand, the EU leaders are divided over sanctions on Russia. Italy is going through a soft patch economically and leaders of the government will do whatever it takes to increase business for Italy, that’s why Italy is not pro the sanctions. Germany and some other countries are also soft regarding Russia for their own reasons. Britain is up totally for getting tough on Russia because of the poisoning of some Russian agents in Britain in separate incidents. So, this comes down to a discussion between Britain and the US on one side and Russia, China and probably some other county on the other side.
Sanctions on Iran
Donald Trump has cancelled Obama’s Iran agreement and has placed sanctions on Iran, mainly on Oil, of course. But he has issued waivers to some countries to buy Iran’s Oil. Trump wants Oil cheap so this move makes sense. On the other hand, the EU and China oppose the sanctions on Iran as China buys most of Iranian Oil. This is another confusing matter but I’m sure it will be discussed at the summit.
Brexit is ongoing and it is approaching the final stage. Now it comes to the British Parliament to decide whether they will ratify the agreement between Theresa May and the EU. EU officials said today that if the Brexit agreement doesn’t pass the vote in the Commons, then the UK will end up either with no deal at all or staying inside the EU. This issue is between the UK and the EU and they have exhausted it but it will also be discussed at the G20 summit.
Terrorism and climate change will also be discussed at this summit, but they will only be official without much essence in it. Donald Trump has pulled the US out of the Paris Accord on climate change and I don’t think anyone can persuade him to go back.
Also, I think that Trump will go ahead with $200 billion tariffs on Chinese products unless China bends backwards a lot, which I don’t think will happen, so the Trump-Xi talks will be more on the $267 billion in additional tariffs that Trump has threatened China on top of the $200 billion.