It has been a lacklustre trading session with the majority of currencies broadly unchanged as markets hold their breath ahead of tomorrow’s G20 Summit and release of key US and Eurozone inflation data. The NZD/USD cross has managed to edge above 0.67 for the first time since mid-April and AUD/USD briefly traded above 0.70 (a 3-week high).
The G20 Summit in Osaka officially starts in Osaka tomorrow with a meeting between US President Trump and his Chinese counterpart Xi Jiping scheduled for Saturday likely to grab the headlines. The US has in the past 12 months increased tariffs on $250bn of Chinese imports and China has retaliated by upping tariffs on $110bn of US imports, with both sides threatening to increase tariffs on all their bilateral imports. If the two sides are unable to reach a compromise, President Trump could impose tariffs of up to 25% on a further $300bn worth of Chinese imports as a US public consultation period on the tariffs ends on 2nd July.
On the data front, the US Personal Consumption Price Index for May is due for release tomorrow. This measure of US inflation, favoured by the Federal Reserve, has oscillated around 1.4% yoy since February while core PCE inflation has been broadly unchanged at 1.6% yoy. The consensus forecast is that the stickiness of US PCE inflation at low levels has been a driver of the Fed’s dovishness and the likelihood that it will cut rates in coming months.
