Global equities are under pressure as China called off planned trade talks with U.S., potentially triggering an escalation in the tariff war between the world’s largest economies.
Prepare for an eventful week! The Fed will kick off its June 2-day FOMC meeting on Tuesday and is expected to announce a 25 basis points rate hike. The same day President Donald Trump will be in Singapore for the much-anticipated meeting with North Korean Leader Kim Jong Un. Simultaneously, U.K. Prime Minister, Theresa May, will ask her party to overturn changes to the E.U. withdrawal bill.
Market attention is turning towards the G7 conference that begins tomorrow in Quebec, Canada.
Expect this summit to be an intensive affair amidst heightened trade tensions between the U.S. and some of its closest allies who have indicated that they will retaliate against President’s Trump’s decision to impose duties on steel and aluminum imports from the E.U., Canada, and Mexico.
After the U.S. imposed steel and aluminum tariffs on E.U., Canadian and Mexican imports, political tensions, and the risk of a global trade war are back in focus, making this week’s summit more important than usual. U.S is headed for a showdown with its G7 allies at a summit in Quebec, Canada (June 8-9).
The EUR saw 11-month lows after Italy’s president scuttled an attempt by a coalition of Italian anti-establishment parties to form a government. With fresh elections increasingly likely, markets should expect the Five Star and the League to campaign on the idea that they were denied the “right to govern,” possibly resulting in a stronger populist sentiment at the next election.
Trade war talks are back and the dollar is under pressure. Reports that the U.S. commerce department has opened up “a section 232 investigation into the imports of cars to determine their effects on America’s national security” is ringing alarm bells given what happened when the U.S. imposed steel and aluminum tariffs in March.