The two-day G20 meeting last week failed to yield a unified front for global trade. The group dropped their commitment to “resist all form of protectionism”, and with little more than a nod to the advantages of free trade, the meeting may reflect a new era of international relations that center on localization. President Trump has vowed to overhaul the terms of trade, and the inherent uncertainty of what the new normal could look like will certainly weigh on investor sentiment.
Theresa May plans to trigger Article 50 on March 29, which would put the timeline for Britain’s break from the EU in March 2019. The UK will look towards negotiations that give them autonomy over immigration and legislature while maintaining a trade opportunities with EU members. The EU could play hardball in order to stave off similar attempts from other members.
Fedspeak is back on our radar this week, with Chicago Fed President Charles Evans doing the kickoff this morning. Evans emphasized that inflation is “his main concern”, and while the committee is a little more confident that inflation is moving up, they seem to be waiting to see whether fiscal policy will support an upward trajectory. Evans also mentioned that the improvement in wages is below what he would expect it to be. All in all, Evans maintains that “three rate hikes is entirely possible this year.”
Also on the wires: Minneapolis Fed President Neel Kashkari. Kashkari was the lone FOMC member who voted not to raise interest rates in the meeting last week. His comments on CNBC mirrored his views published as an essay – available here. A strong dovish voice at the FOMC, Kashkari thinks that the labor market is not operating at full force and that growth is lagging. We would slightly discount his views as he is no the extreme end of the spectrum and may not accurately reflect the thinking of the committee as a whole.
EURUSD: Euro slightly higher as trade concerns weigh on the USD.
GBPUSD: Sterling flat after overnight moves failed to gain traction, Brexit to begin on March 29.
AUDUSD: Aussie dollar slightly higher as broad USD weakness plays out.
USDCAD: Further squeeze in oil prices is putting pressure on CAD.
USDJPY: After a mixed morning, USD/JPY is flat below 113.