It's all kicking off

Suspension of disbelief
The surprise is not that Trump blew up the G7 meeting, it is that there has been so little reaction in the FX market. No flight to safety, no obvious buying or selling of the US dollar and no exodus from the Canadian dollar. Even gold is unchanged from Thursday morning.

Perhaps it is because investors have become inured to the US president's tantrums.  Nothing he might do could nowadays be described as "unexpected". So leaving the G7 summit early, refusing to sign the group statement and bad-mouthing the Canadian prime minister are simply disregarded as another bout of trumpian petulance.  

Except for the South African rand, which extended its weekly decline to 3.6% as a result of investors' aversion to emerging market currencies, not a great deal has changed since Friday morning. The US dollar, the euro, the Japanese yen, the Australian dollar and the British pound are practically unchanged against one another. Switzerland's franc is half a cent lower.

Getting it right
A month after Turkey's president Erdogan set fire to his currency, by threatening to take personal control of monetary policy, the lira put in the strongest daily performance on Thursday. It has strengthened by 2% following another rate hike by the central bank.

A fortnight ago Turkey's central bank added three percentage points to its one-week repo rate. It took it another point and a quarter higher on Thursday. Now at 17.75%, with the lending rate 150 basis points higher than that at 19.25%, the benchmark is a significant deterrent to speculators who might otherwise wish to run short-lira positions.

It looks as though the professionals have regained control of Turkish monetary policy from the economically naïve president. The lira could (could, not must) regain some stability.

Two dictators
Fox and friends, the US president's favoured reality channel, referred yesterday to tomorrow's summit with Kim Jong Un as "that meeting between two dictators". It will be watched closely by investors but it is by no means the only potentially pivotal event on this week's agenda.

The other big meeting on Tuesday will take place in the House of Commons, where MPs will debate amendments to the EU withdrawal bill. As usual the rule is, the harder the Brexit the softer the pound. There is no shortage of UK ecostats this week either. Today it's production and trade, tomorrow jobs and wages, Wednesday inflation and Thursday retail sales.

On Wednesday there is every expectation that the US Federal Reserve will increase its target for the Funds rate by a quarter of percentage point to 1.75%-2%. On Thursday, although no press conference is scheduled for its president, investors are expecting something from the European Central Bank. It might not be much though, perhaps just a comment that the Governing Council has discussed the wind-down of its quantitative easing programme. The Bank of Japan will also be holding a monetary policy discussion, on Friday, but no change is likely.