Trade was a major point of discussion this week as the leaders of the world’s 7 largest economies meet in Quebec, Canada. Recently, the United States announced that it would impose tariffs on imported steel and aluminum on Canadian, Mexican, Japanese, and European Union steel and aluminum. This led to retaliatory tariffs from these countries and petitions to the World Trade Organization (WTO). Behind the scenes, the Trump administration is trying to kill the WTO, with the failure to confirm the judges.
Today, Donald Trump will travel to Canada for the annual G7 meeting. As a result of the differences, the summit has been nicknamed as the G7 minus one or G6 plus one. Yesterday, the tension for the summit increased after Trump attacked the Canadian and French leaders in twitter. In the tweets, he complained about the tariffs and non-tariff barriers the European Union and Canada have placed on American goods. Particularly, he complained about the 300% tariff Canada charges on American dairy products.
Trump will arrive in Canada in the morning today and leave tomorrow in the morning for Singapore. Yesterday, the White House announced that Trump will leave the summit earlier than planned. This is probably because of the irrelevance of the topics to be discussed in the Saturday’s sessions. They will be on climate change and oceans, topics that Trump has never been interested in.
This week, there were no major economic data. On Monday, the Australian Bureau of Statistics announced that the country’s retail sales for April were better than expected. On Tuesday, the RBA monetary policy officials met and left interest rates unchanged but indicated that a future interest rate would be necessary. The optimism for a rate hike improved further with the release of the GDP numbers on Tuesday. The numbers showed that the country’s GDP was doing better than expected. Nonetheless, the AUD/USD pair is down by about 1.30% in the past five days.
In the week, the US dollar fell against the major currency pairs as traders started worrying about the prospects of a trade war. The dollar rose slightly against the Japanese Yen. Then, it fell sharply against the Great Britain Pound and the Euro by almost one percentage point. On the euro, there was optimism that the ECB officials would discuss exiting the easy money policies when they meet next week. They are likely to press on with the unwinding process in September as the inflation rate has reached the targeted 2%.
The pound had a mixed week after reports from that the Brexit minister would step down after disagreeing with Theresa May. Yesterday, the minister, David Davis announced that he would remain in the job. On her part, Theresa May – who is attending the G7 summit – announced that she would let the House of Lords vote on her proposals before the summer break.
WTI and Brent initially fell by more than 4% after a report emerged that China had more crude reserves than earlier expected. On Wednesday, the price of the two started gaining and is now closer to where it started the week at. Still, crude prices have fallen significantly from the previous highs as traders started getting worried about increased supplies from Russia and OPEC.