I suppose Oil will also be on the G20 summit agenda

US Session Forex Brief, June 28 – No One is Going Anywhere Until G20 Summit Ends

Posted Friday, June 28, 2019 by
Skerdian Meta • 4 min read

A lot has been going on in relation to financial markets in recent months. The global economy started to deteriorate again after a short-lived revival in Q1 and in Q2, the global economic slowdown has picked up pace further, with the US economy which as holding up well in 2018, now joining the rest of major economies. The trade war with China has picked up as well in the last two months which has hurt the sentiment in financial markets, while geopolitical tensions between US and Iran almost led to another war in the Middle East. So, financial markets have been sort of hectic during these two months.

But now, the G20 Summit is finally here, which should give us some clarity of where things might be headed in the coming months. The main issue of this summit is the meeting between US President Trump and the Chinese counterpart Xi. China has all eyes on this meeting, trying to get a break from the tariffs but nothing is certain. US Trade Secretary Mnuchin did say that the trade deal is 90% done, but just like the Brexit deal which was 95% complete, it’s the 5% or the 10% that matters most. So, all these issues, including Brexit and the European parliament, will be discussed in this summit and everyone is waiting to see what will be decided before they take any sides in financial markets, and that’s why the price action has been minimal today.

European Session

  • French Consumer Spending and Prelim CPI – Consumer spending has been declining in the three out of the last five months since December last year as the French economy has weakened considerably. Although, the last two months have been positive, with spending increasing by 0.8% in March as last month’s report showed, but was revised much lower today to 0.3%. Today’s report which was for May was expected to show a 0.2% increase in consumer spending but came at 0.4%, which is positive. CPI inflation for this month also beat expectations of 0.0% and instead grew by 0.2%, but last month was revised lower from 0.2% to 0.1%.
  • UK GDP – The British Final GDP for Q1 came out as expected today, showing 0.5% rate of growth. Overall GDP is higher when compared with the same quarter a year ago, UK GDP increased by 1.8% to Quarter 1 (Jan to Mar) 2019, up from 1.4% in the year to Quarter 4 (Oct to Dec) 2018. This is a confirmation that the UK economy was holding up well in Q1, but it’s the Q2 which will be problematic. The current account deficit was expected to grow from around -23 billion to 32 billion Pound, but it came at -30 billion.
  • Eurozone CPI YoY – The inflation report from the Eurozone was released this morning and headline CPI remained unchanged at 1.2%. But the core CPI which is more important increased by 3 points, coming at 1.1% against 1.0% expected and up from 0.8% last month. This is a quick reversal after the dive in inflation last month, which is positive for the Euro and the ECB. Although it’s not a great number, at least core CPI moved above 1.0% which is the minimum target and the red line for the ECB.
  • Italian CPI MoM – Inflation has been positive this year in Italy, although last month was revised lower to 0.0% from 0.1%. But this month we saw another positive number. Italian CPI MoM also beat expectations of 0.0%, coming at 0.2% this month. YoY inflation also came higher at 0.8% against 0.7% expected.
  • China’s Attention is on the Trump-Xi Meeting – China’s Foreign Ministry said this morning that they will release information on Trump-Xi meeting in a timely manner. China hopes that US and China will meet each other halfway, but as I have said before, there’s no half way in this situation.

US Session

  • Trump Tweets on Stock Market – The US President Donald Trump is in Japan, so expect his tweet to come out earlier than usual this weekend. He already tweeted today: “The Stock Market went up massively from the day after I won the Election, all the way up to the day that I took office, because of the enthusiasm for the fact that I was going to be President. That big Stock Market increase must be credited to me. If Hillary won – a Big Crash!”
  • Canadian GDP – The GDP report from Canada was released a while ago and the GDP expanded by 0.3% in April, against 0.2% expected. GDP YoY came at +1.5%, missing expectations of +1.6% expected, but ticked higher from last month which stood at +1.4%. Goods producing showed a +0.4% increase in April, down from +0.8% in March. Service-producing sector increased by +0.2% from +0.4% in March. Raw Materials Price Index (RMPI) declined by 2.3%, which is better than a 3% decline expected. Although, this comes after a strong jump of 5.6% in March. The GDP was contraction in Canada during the last months of 2018, but now a positive trend seems to be forming, which is positive for the CAD. USD/CAD lost 20 pips after the GDP report was published, but is retracing some of those losses now.
  • US Personal Spending and Income – Personal spending was pretty weak at the beginning of this year, which was also affected by the government shutdown. Although, in the last three months spending has picked up and last month’s number which was for April was revised higher to 0.6% from 0.3% initially. Spending was expected to show a 0.5% increase for May, but missed expectations coming at 0.4% which is a good number nonetheless. Personal Income also came out positive, showing a 0.5% in May against 0.3% expected, just like in April.

Bearish USD/CAD

  1. The pullback higher is complete on the H4 chart
  2. MAs are pushing this pair down
  3. Fundamentals are bearish for this pair

The retraces has been really weak this week

USD/CAD turned bearish last week, particularly after the FED meeting last Wednesday and has lost around 350 pips from top to bottom during this time. The climb in Crude Oil prices has also helped the CAD, which remains bullish now, with USD/CAD remaining bearish. Fundamentals are also pointing down and today’s positive GDP reading from Canada sent this pair 20 pips higher. The moving averages are also pushing the price lower, so everything screams bearish for this pair.

In Conclusion

The G20 Summit has already started but we haven’t gotten any meaningful messages from there yet. I suppose they are doing the courtesy rituals today before the grown up talks start. Trump tweeted about the rally in stock markets today, but if he and the Chinese President Xi don’t reach a deal this weekend, the stock markets will turn bearish again, which would be funny. But, let’s hope for the best.

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