US China trade tariffs US China trade tariffs US China trade tariffs

All eyes on G20 for fate of CNY

Forex 7 minutes to read
Picture of John Hardy
John Hardy

Head of FX Strategy

Summary:  The G20 meeting and Trump-Xi summit is finally rolling into view. We’re not optimistic that the US-China trade showdown will thaw in any meaningful way over the weekend, and a particularly disappointing sense that the relationship is souring further could make for fireworks next week, especially if China unleashes the CNY.

The Federal Open Market Committee meeting minutes elicited a collective yawn, as they were generated weeks before Powell’s latest speech and as the market’s attention is now squarely on the Buenos Aires G20 meeting and the direction of the US-China trade relationship.

It is clear from these minutes and a parade of recent Fed appearances that the Fed is downshifting and wants a more data dependent stance from here after a very likely hike at the December FOMC meeting. The Fed’s guidance deceleration is likely down to the massive slide in crude prices, clearly tighter financial conditions, signs of a slowdown in the most interest rate sensitive sectors and the pronounced risks from Trump’s trade policies.

Our key barometer for the dollar on the developments in US yields is not just whether they are rising or falling, but the reasons behind the moves as well as, very importantly, the direction of risk appetite. Lower US yields on safe haven seeking and weak risk appetite (for example if the G20 entirely fails to generate anything constructive on trade) would likely prove rather USD positive. Flat to lower (and even very gently rising) yields together with a trade ceasefire emerging from Buenos Aires, meanwhile, could prove a powerful signal for USD weakening for a time.

We see low odds of the G20 driving any lasting improvement in the US-China relationship. The chief question in the event nothing emerges in the wake of this meeting is how quickly China signals its intentions for its currency. A guess would be no immediate volatility and some delay of weeks or longer before that signal is sent.

On a side note, the noise level from the Mueller investigation is escalating dramatically and will occupy increasing bandwidth in the political headlines as well as acting as a significant distraction in the Trump administration, possibly eventually impinging on financial markets as well.

The latest confession from Trump’s lawyer Cohen about Russian contacts ahead of the election related to a real estate deal look serious. Key congressional committees in the new congress that gets underway in January will have Democratic leaders and will exercise “subpoena power” to do everything in their power to take Trump down from any angle it can – with the business side of his past and related conflicts of interest a more likely source of dirt than the collusion angle that obsessed Democrats in the wake of the election and actually prompted the Mueller investigation in the first place. 


Trading ranges have mostly been nervously respected in the run-up to the G20 meeting, but one G10 pair in particular has seen a significant move – AUDCAD, which captures both the slide in oil prices and the hopes that G20 will provide some sort of breakthrough that will improve the outlook for China-linked assets and currencies like AUD. The move looks overdone here based on longer-term valuation and relative interest rate developments, but could overextend further if G20 headlines bring a positive spin. Still, we’ll be on the lookout for technical reversals indicating it is time to get short again for a retest of the lows.
Source: Saxo Bank
The G10 rundown

USD – pivotal into next week on the reaction to G20 developments. The market has traded rising hostility as USD positive, while a boost to risk sentiment on something constructive emerging would likely prove sharply USD negative, given the Fed’s easing off on the guidance gas.

EUR – German bunds are within a few basis points of their range lows of over a year around 30bps – this points to a weak outlook for the Eurozone. Any upside for EURUSD here will likely be driven by USD weakness rather than euro strength.

JPY – paint is drying here as we await for USDJPY to either move and close north of 114.00 or below perhaps 112.00, although the downside technical are murkier. A broad risk off shock needed to test whether JPY as safe haven works any more.

GBP – sterling mostly on its backfoot on heightened uncertainty. Maybe the UK can get rid of the Irish border issue by having Northern Ireland cease to exist ? (FT article – paywall)

CHF – a weak Swiss GDP print brings a different spin to CHF while fading attention directed at Italy helps boost EURCHF back into the range as well.

AUD – the highest beta G10 currency to the developments at the G20 over the weekend as crowded shorts have backed out of their positions in droves ahead of this weekend. The Reserve Bank of Australia meeting next week is unlikely to bring anything interesting. Credit crunch risk for Australia rising.

CAD – Watch for latest GDP print today. The Bank of Canada is expected to stand pat at 1.75% at next Wednesday’s meeting. This weekend’s G20 could provide a dramatic pivot for oil prices as Saudi Arabia’s Mohammad bin Salman and Russia’s Putin will put their heads together in Buenos Aires. If oil has bottomed here, we will look for technical setups indicating that AUDCAD has turned (wary of jumping in as G20 headlines could aggravate the AUD squeeze in the near term). 

NZD – the market has given up on trading the kiwi, as the lowest daily trading in many years attests. Pass, although the 1.0600 area in AUDNZD is rather interesting as a multi-touch trendline comes in around there.

SEK – a negative GDP print yesterday souring the SEK’s rally chances and eroding confidence in the Riksbank’s hike path. EURSEK looking at risk of a squeeze back into the higher end of the longer term range on a close above 10.35.

NOK – oil prices need to ride to the rescue here or else as EURNOK looks like a bull flag setup looking for follow through higher until proven otherwise with a powerful sell-off bar or two.

Upcoming Economic Calendar Highlights (all times GMT)

1000 – Eurozone Nov. Flash CPI
1000 – Eurozone Oct. Unemployment Rate
1330 – Canada Sep. GDP
1400 – US Fed’s Williams to speak on Global Economy
1445 – US Nov. Chicago PMI
G20 Gets underway today


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.