Geopolitics is in scope this week ahead of the pivotal G20 summit set to take place Friday. Further sanctions on Iran and Turkey could be in scope following the shooting down of a US surveillance drone over the Gulf of Oman by Iran and the purchase of Russian land-to-air defence systems by Turkey. US national security adviser John Bolton said not to confuse American “prudence for weakness” during a visit to Jerusalem over the weekend. Meanwhile, tensions between the US and China may find some relief this week with an “extended meeting” between President’s Trump and Xi expected to take place. This follows a breakdown in negotiations back in March following a brief period of respite. It won’t just be markets that are keeping a close eye on the summit in Osaka, with Fed officials interest also heightened with the latest batch of economic data pointing in different directions. Currently, the dollar DXY index sits at three-month lows as markets continue to increase bets of rate cuts by the Fed. The data calendar is also back-loaded for the US with the third reading of Q1 GDP pencilled in for Thursday and May’s PCE index scheduled for Friday.


Over the weekend political scandals have hit, with contender Jeremy Hunt now sitting on par with the previous frontrunner Boris Johnson. Boris is under pressure to appear on Tuesday’s head-to-head TV debate on Sky, where an explanation for Friday morning’s noise complaint following a row with girlfriend Carrie Symonds will be expected. Meanwhile, Hunt tastes blood and continues to ramp up the pressure with his op-ed in the Times this morning where he writes that “a new prime minister needs the legitimacy of having made his arguments public” – a sly dig at Johnson who has been avoiding the spotlight and pinning his colours to the mast. The data calendar is thin this week, so expect politics to dominate sterling’s price action, with only the final reading of Q1 GDP on Friday scheduled with no revision to the 0.5% QoQ prior announcement expected.


The single currency donned on its ninja suit on Friday and sneaked itself to a three month high against USD without a clear driver for the move. A myriad of factors played a role, of which broad dollar weakness likely was the strongest contributor. Eurozone data itself showed some hopeful signs that the slowdown in growth may have bottomed out, with Flash June Purchasing Manager Indices coming in slightly above expectations at 52.1. However, the print still only speaks of a few gems in a ton of mud, as the manufacturing leg continues to be in contraction with a score of 47.8, while the services sector holds -but definitely doesn’t bolt – with a score of 53.4.


The loonie continues its burst of strength this week as it sits near highs not seen since February following a rally in oil due to concerns with supplies running through the strait of Hormuz. A dovish shift by the Federal Reserve also helped matters as divergence in monetary policy stances is supportive of the loonie’s rand. While the Bank of Canada remains in its neutral stance, for now at least, the economic data will have heightened market impact this week as the rebound in the Canadian economy from Q1s dismal reading continues to be gauged. This week sees April’s GDP reading released on Friday along with the Bank of Canada’s business outlook survey which measures 100 companies current outlook and expectations of the business climate.

FX Elsewhere

The Turkish lira is on a tear this morning as opposition candidate Ekrem Imamoglu won the controversial rerun of the Istanbul mayoral election on Sunday. Mr Imamoglu decisively beat Erdogan’s AKP party in what was previously President Erdogan’s stomping ground. Erdogan’s AKP party has now lost control of the major municipalities in Turkey, with the result in Istanbul adding to losses in the capital city Ankara on March 31st. However, this is a win for democracy as the President’s control is eroded.