Will G-20 Matter for FX?

Market Drivers November 30, 2018
FX at standstill ahead of G-20
EUR Retail Sales mixed
Nikkei 0.40% Dax -0.70%
Oil $50/bbl
Gold $1223/oz.
Bitcoin $4220

Europe and Asia:
EUR Retail Sales 5.0% vs. 2.7%

North America:
G-20 All day

The markets literally stood in place ahead of the G-20 meeting today with majors holding 15 pip ranges through Asian and early European dealing.

With no material eco data on the calendar, traders were simply waiting for headlines from the summit and marking time until some newsflow came their way, The EURUSD continued to meet resistance at the 1.1400 level partly due to month-end flows for the dollar, partly due to some hope that President’s Trump and Xi could work out some compromise on trade.

It’s doubtful that US and China could come to some far-reaching agreement in Buenos Aires and ahead of the summit officials already tried to temper expectations that a deal would be coming noting instead that two parties are likely to extend their discussions into spring with US delaying any further tariffs for now. On the face of it that would seem like good news for the dollar, but in actuality, it is simply the absence of an additional negative and it remains to be seen how much help the buck would get from any such statement out of G-20.

Meanwhile, on the economic front, EU core CPI printed at 1.1% versus 1.3% indicating that price pressure in European union are muted which in turn is reflecting a slowdown across G-3 in Q3 of this year as US inflation data came in soft as well.

With growth momentum clearly weakening in the OECD universe and price pressures non-existent, it’s difficult to see how monetary policymakers can remain hawkish in the face of these trends. While, G-20 could provide some temporary volatility with its headlines unless leaders produce some dramatic agreements the reaction from G-20 will be short-lived as FX markets begin to digest the implications of a synchronized global slowdown.