G20 summit has started: investors are “throwing off” the dollar

Today, the G20 Summit gets underway in Japan, with the subsequent talks set to dominate the news agenda over the course of the next few days. The most interesting meetings are scheduled for Saturday, meaning that on Monday the market will open with a gap on both the American and Chinese markets.

The main focus will still be on the US-China negotiations. Interestingly, the media leaked information from “informed sources” that Trump and Xi Jinping had agreed in advance that – after the meeting – they will announce a truce in the trade war, so not to create too much of a negative effect to the markets. Added to this, US Treasury Secretary Steven Mnuchin stoked things up further by stating that the agreement “is 90% ready.” Of course, this does not mean it will be accepted and executed. On the one hand, the markets understand this and try to avoid making any sharp movements: the Dollar index stood still at the level of 96.18 on Thursday. On the other hand, the investors are rather tired with the trade war issues, and a certain optimism, fed by rumours from the media, is included in the US indices quotes.

Last session, the stock markets closed in different directions: Dow Jones lost -0.04%, S&P500 grew by 0.38%, and NASDAQ Composite was in green by 0.67%. The Hang Seng, which closed yesterday 1.42% higher, and the NIKKEI 225, which added 1.19%, probably believe in a positive resolution of the US-China situation.

As for macroeconomic statistics, it is interesting to pay attention to the published US Initial Jobless Claims. The data showed an increase of 10K, to 227K, while analysts expected a more modest increase, to 220K. This affected the EURUSD fall, with the rate dropping from 1.1372 to 1.1355 within an hour after the data was published. However, it later kicked up, and during the first G20 hours on Friday, it was going vertically upwards, above 1.1390. Investors came out of the dollar, fearing what decisions will be made at the summit.

As mentioned by the FxPro Analyst team, it is also worth opening the economic calendar today to check the actual Core PCE value for May (y/y). Despite the data being released with a month-delay, it could increase the volatility in pairs with the dollar. The fact is that this value still cannot reach or consolidate above the key level of 2% (now it is 1.6%, with a similar forecast). This indicator is monitored by the Fed: based on it, the regulator decides whether to normalize the monetary policy or not. Since the beginning of the year, the underlying inflation rate has slowed, influencing Powell’s decision to suspend a series of interest rate increases.

If the analysts’ expectations are not justified, and the data turns out to be even worse than the forecasts, the triumphant start to the day for the EURUSD will get additional support and send the pair up to 1.141 – and potentially even higher. If we see an increase in value, it will help the dollar to stabilise itself for a moment and adjust its course against the euro. However, any news from the G20 may be stronger.

Crude oil, apparently tired of growing, and following Thursday, dropped to $65.46 per barrel, losing 1.55%. Investors are worried about Trump’s views on keeping energy prices as low as possible. At the same time, Saudi Arabia requires the support of the White House to ensure the safety of tankers in the Persian Gulf.