US DOLLAR
Focus shifts to Osaka G20 summit where handshakes will be heavily analysed and noises from Twittersphere are expected to inject short-term volatility into the markets. It will be a fairy-tale-like ending if a trade deal is agreed upon between Washington and Beijing over this weekend. However, the outcome of the meeting may very well send a signal to the rest of the world that both parties are willing to discuss anti-protectionism measures. In the meantime, the currency market remains cautious with investors avoiding any aggressive directional bets. PCE price index in the US rose 0.2% matching estimates but failed to inject any trading activities. We expect month-end and quarter-end portfolio rebalancing to dictate the flows.
CANADIAN DOLLAR
USD/CAD dips below the 1.31 handle after report card revealed Canadian GDP increased 0.3% in April, beating market estimates. Wholesale trade expanded 1.4%, rising for the fourth consecutive month. The Canadian loonie is expected to finish the month strongly, near a five month high as oil prices approach key $60 a barrel.
EURO
EUR/USD stays range-bound, unable to break above the 1.14 post. Inflation in the euro-area came to the upside at 1.2% but failed to inspire the Euro bulls. Once again, the main theme in the market remains the ongoing G20 meeting. Investors are hoping strong resolutions are adopted to support trade and global investment over the weekend. Geopolitical factors and growing threat of protectionism have been major headwinds for the euro area outlook.
BRITISH POUND
Gross domestic product in the UK increased 0.5% over Q1 and supporting the Pound this morning. GBP/USD is up 0.27% on the day but well within recent trading ranges. The economy has shown some resilience, despite political mess, growing by 1.8% compared to same quarter a year ago. Market waits for the new PM and more clarity around Brexit.
JAPANESE YEN
The greenback is shedding gains this morning, unable to find momentum above the 108 figure. Market is turning cautious as the proceedings on the G20 meeting starts. Economic data seems to have taken a backseat with inflation numbers out of Tokyo largely ignored. The housing starts in Japan also recorded a severe drop of 8.7% in May. Dollar-yen will be moving with cautious as the pair look to close the month in the red for the second month in a row.
