Is it the Quiet before the Storm or is it Just Quiet?

Bill Poulos shares his experience of trading the markets with everyone through investing books, articles, and YouTube videos. Below, he updates us on the foreign exchange markets.

Generally speaking the currency market has been very quiet this week seemingly in a holding pattern waiting to see what the results of the G20 summit will be. The result of the actual summit is far less relevant than the results of all of the side deals and negotiations that are going on around the trade war. President Trump has made it very clear that trade talks are his top priority while China does seem to be in agreement though they have stated that their position has not changed. I do not expect that much movement will come from the talks in the form of an actual agreement but there may be enough movement to put the market at ease if it appears as though the dialogue will continue. There was talking around the US delaying the next round of tariffs if there is enough progress made.

The market may have also slowed down to take a break to see exactly what may happen with the world’s economies. There’s allot of doom and gloom around the world right now pointing directly to some key indicators that are historically very accurate at predicting a recession. Based upon many indicators a recession has already started it’s just that not all segments of the world economy have caught up yet. The odd thing is that the US stock market seems to be living in its own reality with an attitude that seems to suggest that bad news is good for stocks. Rate cuts by the Fed have already been baked into some pricing models which is exactly what President Trump has been complaining about. The Fed may have increased rates too many times and by too much killing or minimally stifling longer term US expansion. The argument is that if rates were cut fewer times and about half as much the US economy would be humming along without a serious recession threat to be concerned about.

USD was relatively flat against the EUR, GBP, JPY and CHF while the CAD, AUD, and NZD took advantage of it. It does seem as though we can expect some movement after the G-20 summit is concluded however we do have a short week to look forward to next week with the July 4th holiday in the US.

The Brexit situation is still posing its own set of problems within the UK. UK consumer sentiment has been low but it seems as though it may be turning a little darker still and major business investments have largely been put on hold as well. This will all work itself out when the terms of Brexit become clear but that clarity is exactly what has been elusive thus far. This week GBP held up well against the USD and JPY while losing slightly to the EUR, it was taken advantage of by the CAD and AUD while it lost over 4 big numbers to the NZD. All in all, GBP really hasn’t done badly considering what’s going on in the UK.

The EUR didn’t have much of week to talk about staying relatively flat against most of its major competitors with the CAD being the exception. Last week the CAD took severe advantage of the EUR with the EUR gaining almost all of its loss back at the end of the week. This week the CAD took it all back with very little, if any, fight from the EUR.

The big winner this week may have been the CAD taking advantage of just about all its major trading partners with the exception of staying about even with the AUD and NZD.