Morning Commentary: Perception is Reality?

Foreign Exchange - Morning Commentary

Perception is Reality?

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Markets remain cautiously optimistic about a positive outcome regarding the meeting between President Trump and President Xi at the G20 meeting tomorrow to help jumpstart the stalled trade talks between the two countries. President Trump predicted a “productive meeting” with President Xi and markets continue to cling to the hope that something positive will result from their meeting.
Perception becomes reality for many in the market whether the result of their meeting is something tangible and concrete or just more scheduled meetings and “kicking the can down the road” to find common ground. The possibility of no breakthrough and more punitive U.S. tariffs on Chinese exports to gain bargaining leverage is currently not part of any mainstream thinking surrounding this weekend. Markets want to believe that there will be productive discussions.
As for the markets today, it is the same old song. Small ranges and consolidation patterns have been the norm over the past few days as investors and traders await the outcome of the G20 meeting. Asian equities were all in the red but European equities have rebounded and are now solidly in the green; U.S. equities are scheduled to open higher. G7 interest rates are near unchanged and the U.S. dollar is slightly weaker against both the major and emerging market currencies. I am sure Monday will bring a very different story to tell about how the markets reacted to the G20 meetings and other political spin from the White House.
  • Japan reported a number of key economic indices overnight. UR remained unchanged at the microscopic rate of 2.4%. Tokyo CPI remained unchanged at YoY at 1.1% but industrial production for May came in much stronger than expected at 2.3% against expectations of a gain of 0.7%. The Japanese yen is unchanged from last night’s close.
  • U.S. economic data this morning showed that Personal Income and Personal Spending for May came in near expectations with solid gains. Personal Income beat expectations rising by 0.5%, matching April’s report. Personal Spending was a fraction weaker than expectations at 0.4%, but higher than April’s reading of 0.3%. U.S. interest rates are near unchanged on the session.
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