It's all about the G20

We're seeing a slightly positive start to trading on Thursday, with investors possibly expressing some optimism ahead of the G20 meeting between Trump and Xi.

It's often not worth reading too much into these kinds of moves going into such a big event, especially when you look across a few days and see that we're not actually far from where we started the week. It's clear that investors are a little cautious when it comes to this meeting, given how talks collapsed previously and the fighting talk we've since seen from both sides.

Trump appeared very optimistic as he headed off to Osaka while warning that he's more than happy to impose tariffs if talks fail. Trump's dual role as both good cop and bad cop has become a common feature of these occasions though so people don't seem to be reading too much into this.

Instead, any optimism stems primarily from how much sense a deal makes for both countries, neither of which want to see large tariffs on all imports and exports. From a markets perspective, a complete breakdown may spur some near-term weakness but with central banks waiting in the wings and prepared to cut rates, they may continue to be well supported. Let's face it, the prospect of them has pushed US stocks back to record highs.

Gold hovers above $1,400

We've seen some profit taking in gold over the last couple of days, following hints from various Fed officials that market expectations for rate cuts are a little over the top. These warnings haven't exactly fallen on deaf ears, with three cuts still more than 60% priced in this year, but expectations of a 50 basis point cut next month have slipped, for good reason. Traders are still absolutely convinced that a cut is happening though.

The comments have brought some relief in the dollar, which came under heavy pressure after last Wednesday, which has in turn taken the edge off the gold rally. Still, it continues to hold above $1,400 which is the first test of support for the yellow metal. Should it break through here, then $1,370-1,375 may provide further support.

Bitcoin rises fast and falls hard

We're getting an early reminder today that bitcoins extreme volatility works both ways, with the cryptocurrency tumbling more than 10% and extending it's losses since peaking yesterday to almost 20%. The sudden plunge has been widely attributed to another crash, that of Coinbase, the US crypto trading platform.

Perhaps this was just a convenient opportunity to lock in some profits or maybe it's a reminder just how influential one exchange is and therefore how sensitive prices are to these kinds of outages. Maybe both of these are true but it will be interesting to see just how quickly prices recover. This is a wild market and I wouldn't be surprised if bitcoin ends the day in the green.

Can oil continue to rally?

Prior to the latest eruption in the crypto space, oil was looking like the volatile player in the market but these moves pale in comparison. Oil prices have sprung back to life over the last couple of weeks, aided this week by huge inventory drawdowns, as reported by API and then to an even greater extent by EIA, who reported the largest reduction in stocks in almost three years.

Whether prices can continue to rise will likely depend on how the meeting in Osaka goes over the next couple of days. Global growth risks are a major downside risk for oil prices, although they have been overshadowed the last couple of weeks by geopolitical flare ups, inventory declines and the prospect of an OPEC+ cut extension. I do wonder whether recent price action may put that at risk next week though.