North Korea, Central Banks and World Cup Highlight Busy Week

The U.S. dollar was mostly flat overnight as traders gear up for what promises to be one of the busiest weeks of the year.

USD

The exception would be CAD/USD which has seen wild price swings since Friday. The rift between the U.S. and Canada intensified over the weekend as President Trump tweeted that Canadian Prime Minister was “weak” and followed with other insults following meetings at the G-7 in Canada over the weekend. Market participants have viewed the new war of words as an indication that Canada will not secure an exception to aluminum and steel tariffs and sent the loonie in a downward spiral.

President Trump left the G-7 meeting early as he headed to Singapore for his historical meeting with North Korean dictator Kim Jong Un. Trump and Kim as set to meet one on one and then have a “working lunch.” New surrounding the meeting should break late tonight into the early hours of Tuesday, Eastern time.

Attention will then shift to the Federal Reserve’s meeting on Wednesday afternoon. Fed Fund Futures are pricing in 100% chance that the central bank will raise rates by a quarter of a point, so drama should be muted following the initial decision. However, the messaging from the Fed following the rate decision will likely dictate the direction of the greenback for the second half of the week.

The FIFA World Cup begins in Russia on Thursday morning. Analysts except more than three billion viewers for the world’s largest sporting tournament.

 

EUR

The Euro held on to its rally from last week ahead of a busy week for geopolitical events. The common currency is near a four-week high after new Italian Finance Minister Giovanni Tria said that there was “no discussion” of any proposal to leave the Euro and that the Italian government would also block any market conditions that would “push toward an exit.” As a result, Italian stocks and bonds have rallied.

The biggest event on the European calendar is the European Central Bank’s meeting on Thursday. While no change to rates is expected, we are expected the central bank to discuss and possibly announce a date to end their bond purchasing program. Confirmation that a discussion is likely sent the Euro higher last week.

 

GBP

The British pound is softer to open the week following weak economic data. U.K. manufacturing output fell the most in five years in April. Manufacturing production dropped 1.4% month over month, versus and estimated rise of 0.3%. Industrial output dropped 0.8% m/m compared with an estimated gain of 0.1%.

On the geopolitical side, we will be watching developments ahead of the Tuesday/Wednesday parliamentary debate on the U.K.’s Brexit bill.