FX Steady – Macron in the Crosshairs

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Market Drivers March 20, 2017
Pound clears 1.2400
G-20 fails to agree on free trade
Nikkei closed Dax -0.32%
Oil $48/bbl
Gold $1232/oz.

Europe and Asia:
AU Westpac survey 111.9 vs 113.9

North America:
CAD Wholesale Sales 8:30

It’s been a very quiet start of trade for the FX market today with Japan out on holiday and global economic calendar essentially barren.

The big news from the weekend was the failure of G-20 to provide full support for free trade, as the protectionist administration of Donald Trump scuttled the customary language. Instead, the communique offered only a token reference to trade saying the G20 would work together to strengthen the contribution of trade to their economies.

The move was seen as a clear defeat for Germany which is one of the leading exporters in the world and the biggest proponent of free trade policies. Although there was much hand-wringing about the pivot from tradition and the much more protectionist slant of the language, it is premature the speculate if the impact of the communique will have any practical effect just yet.

There is no doubt that the protectionist tilt of the Trump administration will have consequences on the US market, but that was already going to take place regardless of the G-20 language. The key question is whether the rest of the world will follow US’s isolationist path and that remains very much to be seen.

Meanwhile, the impact on FX trade was minimal as the dollar remained essentially where it was on Friday – weaker across the board. Cable broke above the 1.2400 figure and continues to target the key 1.2500 figure even as PM May prepares to trigger Article 50 before the end of the month. USD/JPY is still mired near the 112.50 level and if it breaks below the pair could test the key support at 111.50. EUR/USD in the meantime was steady at 1.0760 but the pair faces very stiff resistance at the 1.0800 level compounded by the lingering political concerns of the French election. Tonight all the major candidates will have a televised debate and the focus will be squarely on the front runner Emmanuel Macron. Any weak showing could cause a tumble in the euro if the polls run against him.

Otherwise, the first day of the week promises to be uneventful with range trading likely dominating the North American session as traders look for fresh catalysts to move prices.

Boris Schlossberg
Managing Director

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