The EUR USD exchange rate is currently stuck around opening levels of 1.1213 as markets await news from the start of today’s G7 meeting.
Today’s sparse Eurozone data has not been supportive for the common currency, although weakness in the US Dollar has kept the EUR USD afloat in the region of its nine-month high.
Italian consumer and business confidence figures have both disappointed forecasts, showing weakening sentiment amongst households and the private sector.
While consumer confidence was expected to weaken from 107.4 to 107.3, the index for May instead fell to 105.4.
Meanwhile, business confidence had been predicted to rise from 107.7 to 108, but it instead weakened to 106.9.
Meanwhile markets are also unsettled thanks to today’s G7 summit, in which US President Donald Trump will meet with the leaders of Canada, France, Germany, Italy, Japan and the UK.
Two key issues are likely to be climate change and trade, with markets particularly interested to see what discussions are held regarding the latter.
Donald Trump was fiercely anti-trade during his election campaign and, upon his inauguration, instantly set about withdrawing from the Trans-Pacific Partnership (TPP).
He also came close to withdrawing from the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico, before declaring at the last minute that he would instead seek to renegotiate.
However, in other areas, his attitude has softened – such as U-turning on his promise to label China a ‘currency manipulator’ – and so markets are waiting to see what the President has to say about trade when faced with the leaders of the other G7 members.
But White House economic advisor Gary Cohn has attempted to defuse tensions regarding trade, claiming;
‘What the president means by free and open is, we will treat you the way you treat us, meaning if you don’t have barriers to trade or you don’t have tariffs, we won’t have tariffs.’
Investors are additionally on hold thanks to the approach of headline US data this afternoon, which could alter the odds of the Federal Reserve hiking interest rates next month.
While stating in the recent meeting minutes that it would ‘soon be appropriate’ to hike interest rates again, the Federal Open Market Committee did stipulate that data would need to continue printing in line with expectations.
Therefore, should today’s GDP, GDP price index and durable goods orders figures all disappoint to the downside, this could cause strong expectations of a rate hike to wobble.
