The significance of today’s G7 meeting in Japan has been falling in
importance in line with the weakening yen. Back on 3rd May, when USDJPY
was down at 106, it was thought that Japan would be looking to re-align
the currency and perhaps looking for some support from their G7
counterparts, but that was always going to be a long-shot, not least
because there are few who are looking or hoping for a stronger currency
at this point in time. So expect some anodyne statement in relation to
currencies, indeed if there is any reference to them at all. The dollar
is ending what will be its third consecutive week of gains on the
dollar index, with the June FOMC meeting now back in the frame as a
‘live’ meeting for a rate hike. The question is whether June is going to
turn out to be September, meaning September last year when the whole
world and their wife were looking for a Fed move that never arrived that
month. It’s going to be the activity and price data that determines
that.
In the UK, according to the FT, bookmakers have been cutting the odds
of a Brexit, even though the polls continue to show only a narrow lead
for the ‘remain’ campaign. Sterling was at 3.5 month highs vs. the EUR
yesterday, with Brexit weighing less heavily on the currency than was
the case earlier in the year. The firmer than expected retail sales
data was also supportive, with the revisions suggesting we may see an
upward revision to first quarter GDP. For today, the interest is mostly
with Canada, where CPI data is released at 12:30 GMT. After
Australia’s easing earlier this month, in the dollar bloc, the focus is
on both Canada and New Zealand as those most likely to move rates next.
New Zealand looks likely early next month. Canada looks less assured,
but still possible for later this year.
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