Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
US President Trump's weekend rampage across the geopolitical stage has caused widespread consternation but the market response is restrained thus far with most asset classes treading water and awaiting further developments.
The G7 meeting (which some are dubbing G6-plus-one) saw Trump demanding the readmission of Russia, refusing to endorse the joint statement and picking a fight with Canada's Justin Trudeau, says John J Hardy, Saxo's Head of Forex Strategy. "As Raoul Pal says we're basically seeing the unwinding of the post-WWII global order in geopolitical terms. This is a huge shift," Hardy says.
However, the immediate market takeaways are a bit minimal with the Canadian dollar opening a tad weaker on uncertainty.
As far as equities are concerned, the most important issues is that Trump is planning to impose tariffs on imported auto parts. "You should watch the German and the French manufacturers as these would be hit hardest by this" says Peter Garnry, Saxo's Head of Equity Strategy.
Elsewhere in market news, Italy's new finance minister says he wants Italy to stay in the euro and he also wants to reduce the country's debt. Hardy points out that these tasks seem at odds but nevertheless, Italy's 2-year yield is opening 40 basis lower, which is quite helpful for the euro ahead of this week's European Central Bank meeting. For rate expectations stateside, 85% to 90% of the market believes that this week will see the Fed raising interest rates.
On Brexit there's an important vote coming up which could become an existential flashpoint for Theresa May's Tory government should sufficient of her party colleagues vote against it.
Finally today, it'll be a busy week also for commodities with important data releases from Opec and the EIA and, as Ole Hansen, Saxo's Head of Commodity Strategy says, "a rise in political meddling, making it very difficult to gauge where crude oil is going next".
Gold remains glued to $1300/oz as a softer dollar and geopolitics offset nervousness ahead of the June 13 Fed rate hike. A break of either $1286 or $1308 would likely determine the near-term direction, Hansen concludes.
Disclaimer
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 (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)