Canada G7 meeting more fight club than forum

Michael O’Neill

FX Trader, Loonieviews.net

The Canada G7 meeting in Charlevoix, Quebec, is beginning somewhat acrimoniously. It will not be a forum where leaders of the industrialised nations can meet in a relaxing atmosphere to discuss issues affecting the international community. Instead, it is shaping up to be a politician’s version of the Ultimate Fighting Championship.

Prime Minister Justin Trudeau is the host. He is proud of the themes and leader’s programme for this meeting. They are:

   • Investing in growth for everyone.
   • Advancing gender equality and women's empowerment.
   • Building a more peaceful and secure world.
   • Preparing for jobs of the future.
   • Working together on climate change, oceans, and clean energy.

The leader’s agenda has a glaring omission: there isn’t a time slot scheduled for free trade and tariff discussions. That may change. The evidence is this tweet sent by @realDonaldTrump on Thursday morning:

Source: Twitter

Prime Minister Trudeau and French president Emmanuel Macron used a photo op on Thursday to send a warning to Trump. They said they would warn the US president that his tariffs will “backfire and harm America’s workforce.”

The thin-skinned Trump was not likely to take kindly to criticism from a couple of youngsters 25-30 years his junior. He didn’t. Within hours of the statement, he tweeted his reply: “Please tell Prime Minister Trudeau and President Macron that they are charging the US massive tariffs and create non-monetary barriers. The EU trade surplus with the US is $151 billion, and Canada keeps our farmers and others out. Look forward to seeing them tomorrow.”

A few hours later he took another shot at Justin Trudeau: “Prime Minister Trudeau is being so indignant, bringing up the relationship that the US and Canada had over the many years and all sorts of other things...but he doesn’t bring up the fact that they charge us up to 300% on dairy — hurting our Farmers, killing our Agriculture!” 

Late last week, Trump floated the idea (again) of having bilateral discussions with Mexico and Canada. On June 5, National Economic Council director Larry Kudlow said that Trump’s preference is to negotiate separately.

The Washington Post reported that President Trump wanted to skip the meeting altogether. He has since confirmed his attendance. However, he must have read the Leaders Programme for Saturday, June 9, because he is bailing, early.

The faces have been slapped; the gloves are off. In G7 Fight Club, the only rules are Trump’s rules.

Loonie’s feathers get plucked

It should have been a good week for the Canadian dollar.  It wasn't. On May 30, the Bank of Canada issued a hawkish statement, hinting at a July rate increase and leaving the door open for more. However, the positive Canadian dollar sentiment didn’t survive the month end, and trade jitters have been the catalyst. That’s when the US slapped tariffs on Canadian steel and aluminium imports, even though the Nafta renegotiations are still ongoing. Fears about the demise of Nafta and concern about a hawkish conclusion to the June 13 Federal Open Market Committee meeting are underpinning USDCAD.

The Canadian labour report didn’t do the Canadian dollar any favours either. The weaker-than-expected data raises questions about governor Poloz’s optimistic economic outlook while increasing the currency’s downside risk to adverse trade news.

USDCAD is in an uptrend from February while prices are above 1.2750 with a break above resistance in the 1.3165-1.3225 area opening the door to further gains to 1.3500

USDCAD daily with long-term support and resistance levels noted.

The week ahead

Major events:

Tuesday: North Korea/US meeting in Singapore.

Wednesday: FOMC meeting and press conference: Market expects 25 bps rate hike. The Committee may give a “hawkish” tweak to the statement.

Thursday: European Central Bank policy meeting: Markets expecting news of an end-date for QE, as hinted at by ECB chief economist Peter Praet.

Friday: Bank of Japan policy meeting

Major data:

Tuesday: UK employment report. Unemployment rate is expected to be unchanged at 4.2%
US May CPI: forecast 0.2%, unchanged from April.

Wednesday: UK CPI, PPI and Retail Sales. CPI is expected to rise 2.6%, y/y vs April 2.4%, y/y increase.

Thursday: Australia employment is expected to add 18,2000 jobs with a drop in the unemployment rate to 5.5% from 5.6%.

Friday: EU harmonised CPI. YoY rate expected to rise to 1.9% from 1.2% Also, US industrial production and capacity utilisation data.

Access both platforms from your single Saxo account.

Disclaimer

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice or a personal recommendation and does not take into consideration your objectives, financial situation and needs. Saxo Capital Markets UK Limited will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information. We assume no liability for errors, inaccuracies or omissions contained within these materials.

It is important that you understand that with investments, your capital is at risk. We offer leveraged products which carry risk and can result in losses that exceed deposits. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. 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 here.

Additional Key Information Documents are available in our trading platform.

Saxo Capital Markets UK is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871

Please read our full disclaimer - https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer