The coming week will have some serious breakouts, blowouts, and wide ranges in prices, as well as continued “freight train-steamroller” trending behaviors. Gold is in a more extreme narrow range with strongly-trending monthly and inside weekly pivots more breakout-ish than last week as of Thursday. evening.
Ahead of next week’s major central bank meetings and key data releases, the market’s focus has turned to trade tensions as the G7 meetings get underway in Canada and it looks like U.S. President Donald Trump is taking on the whole world. While leaders of the “G7-1” are showing great unity, Trump continues to isolate himself by demanding “fair” trade agreements especially with Canada and the European Union.
The G7 Summit comes into focus to finish out the week. One week after announcing tariffs on the EU, Canada and Mexico, President Trump will meet with leaders from Canada, France, Germany, Italy, Japan, the UK and the European Union. Tensions are due to run high, which also means the market’s low expectations should not create any surprise currency moves.
While President Trump has at times appeared friendly with certain other heads of state in the past, the relationships have at least appeared to have become more hostile since tariffs were imposed on the European Union, Canada and Mexico by the United States last week. The G7 meeting has become more like a G6+1, with Trump choosing to isolate the US on a number of issues from trade to Iran and climate change.
With U.S. President Donald Trump already sparking uncertainty by lashing out at Canada and France ahead of the meeting, optimism has diminished over any agreement being reached on trade during the two-day summit. Risk sentiment could take a hit if the talks between G7 leaders descend into disagreements and arguments. With escalating trade tensions seen as a major threat to global stability, the outcome of the summit could leave a mark on global sentiment.
Equity markets around the globe are seeing a bit of pressure heading into the morning. Most major benchmarks, including the DAX and Nikkei, have lost about 0.5%. The Hang Seng is down 1.7% and emerging markets continue to weigh on global sentiment.
The euro continued to outperform for much of today’s session after top ECB policymakers delivered hawkish remarks on the eurozone economy this week, leading to some chatter that the central bank may announce its intension to end EQ at the end of the year at the conclusion of next week’s policy meeting.
Next week, the ECB will hold its monetary policy meeting. The bank was expected to start winding down its stimulus program at the end of 2018. However, Italian turmoil led some analysts to think that the ECB will remain cautious. Will the ECB withstand the pressure or funk? And what does it all mean for the gold market?