The Dollar, Euro and Swiss Franc were unchanged last week, with Dollar volatility collapsing ahead of the much-awaiting meeting between presidents Trump and Jinping on 29 June.
The meeting between the US and Chinese leaders, within the confines of the G20 summit in Osaka, resulted in an open-ended truce in the trade war. President Trump will hold off on extra import tariffs and will allow Huawei to purchase equipment from US companies, while China agreed to buy more agricultural products. This fell short of a conclusive trade agreement between the world’s two largest trade nations. However, global risk appetite has edged higher with the safe-haven Swiss Franc down 0.4% in the past 48 hours. Data showing a larger-than-expected fall in Swiss retail sales of 1.7% mom in May has not helped a Swiss Franc which a week ago was at its strongest level in nearly two years.
Sterling weakened 0.4% in trade-weighted terms last week. Markets are increasingly less convinced that the Bank of England will hike its policy rate any time soon, particularly as the economic backdrop remains soft at best and the political outlook is still very cloudy. The two candidates for the premiership, Boris Johnson and Jeremy Hunt continue to battle it out, in a bid to convince Conservative Party MPs that their approach to Brexit and plans to stimulate the UK economy will shore up the party’s dwindling popularity.
The Australian and Kiwi Dollar made sizeable gains, appreciating 1.3% and 1.7%, respectively. Both the RBA and RBNZ have become somewhat less dovish in the past month and markets have responded by fading slightly their expectations for further central bank rate cuts.
