Piet P.H. Christiansen, senior analyst at Danske Bank, suggests that optimism on trade is boiling ahead of the G20 meeting in Osaka, which starts today is weighing on safe havens.
“The USD has stabilised somewhat after the recent decline, while the CHF and JPY strength has faded a bit. Notably, EUR/CHF has edged away from the 1.10 area, which may foster SNB action, and USD/JPY climbed towards 108 yesterday. Some parts of the market seem to be pricing a positive outcome at G20 but inflation expectations remain in decline and global data is crucially still weakening.”
“We think USD/JPY continues to have significant downside risks. Indeed, while dollar weakening would help, it likely remains insignificant in terms of turning global macro around, and a trade war premium in USD as likely still present. If a trade truce is agreed by Trump and Xi this weekend, it might initially foster some USD, JPY and CHF weakness and cheer in notably the Scandies and EM but we do not see a long-lived move given (1) already high expectations, and (2) the risk that the US administration has proven it may swiftly change its mind again on these matters.”