With the important G7 Leader’s Summit having kicked off in Singapore today and resuming tomorrow, the Japanese Yen is outperforming major currencies but the Dollar has also made solid gains against European and emerging market currencies. In particular EUR/USD is trading back below 1.18. US President Trump has been engaged in a war of words with major trading partners, including Canada and France, over the use of import tariffs and concerns remains that this will blow into a full-blown trade war, which would hurt both global trade and economic growth.
GBP/EUR has edged back under 1.14 (Interbank/Mid-Market) despite some hawkish comments yesterday by Monetary Policy Council member Ramsden and markets upping their pricing of a Bank of England rate hike in August to 15bp. The British government finally agreed to introduce a back-stop to the Brexit implementation phases which could be in effect until end-2021 in order to avoid a hard Irish border. But this has done little to reassure markets that a divided cabinet can negotiate a favourable deal with the EU ahead of the European Council meeting on 28-29 June.
