Going to a meeting

4 minute read


As the Washington delegation prepared to head for Osaka, Treasury Secretary Mnuchin was talking to CNBC about trade with Beijing. He said "We were about 90% of the way there [with a deal] and I think there's a path to complete this". It is not the first time Mr Mnuchin has expressed optimism on the subject: two months ago he said talks were "getting into the final laps". This time though things are, as the saying goes, different, at least as far as investors are concerned. They took the view on Wednesday that something will be agreed when the Chinese and US presidents meet for the G20 summit.

The US data added little to the conversation. Wholesale inventories grew by a provisional 0.4% in April. The trade deficit widened to $74.6 billion. Durable goods orders fell by 1.3% in May - more than expected - but nondefense capital goods orders ex-aircraft, arguably the best measure of what is happening in the real economy, beat forecast by rising 0.4%.


It is not obvious what took the EUR higher as London opened this morning. The only Euroland data released at the time were for Spanish inflation, and the two measures came in at 0.4% (traditional method) and 0.6% (harmonized EU version). Neither were remotely close to the ECB's 2% target. Italian business and consumer confidence were both a little softer in June, as were the European Commission's "official" surveys. The German inflation data late this morning are also forecast to be well below 2%.

After covering a range of almost half a cent twice the EUR was just about unchanged against the USD. It starts this morning 0.1% higher on the day.


After a speculative spike up towards $60, WTI crude slipped back to towards $50 for a modest 0.7% gain on the day. The CAD did not follow oil slavishly but it achieved a similar result, adding 0.3% against the USD.

There were no Canadian economic statistics. Other than a vaguely upward tilt to oil, the only assistance the Loonie received was an improved risk-on attitude in anticipation of a really great trade deal this weekend.


In London the Bank of England governor told Parliament's Treasury Committee how monetary policy might develop if Britain left the EU without a deal: "It's more likely that we would provide some stimulus in that event". The bank's official line is that following an orderly Brexit, rates could move in either direction, and that decisions will be data-dependent. However, few economists or investors anticipate a rate increase.

The Conservative party leadership hustings recommence today, with another session tomorrow and two on Saturday. Whilst the candidates' commitment to a 31 October departure - with or without a deal - is the most serious consideration for sterling, they are also beginning to open up on fiscal policy. Rash proposals could affect the pound, which is 0.2% higher on the day.  


The yen was one of the safe-haven backmarkers again, made redundant for the moment by the improved risk-appetite brought on by the upbeat trade narrative. It is 0.5% lower on the day and down by more than 1% from its early Tuesday high.

The Japanese data this morning covered international investment flows and retail trade. Sales were stronger than forecast in May, rising 0.3%, but up by only 1.2% from the same month last year, as predicted. 

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