Today marks the first day of a weeklong timeline that will include a series of events that will profoundly impact the financial markets and the geopolitical fabric for years to come.
Today the Group of Seven began its meeting in Québec. Although President Trump will only be in attendance for a single day, his words and actions have the potential to create a deeper chasm between the United States and the other leaders of the G7.
Ahead of today’s meeting, Trump has already begun his war of words through a series of tweets targeting the Canadian Prime Minister Justin Trudeau and the French President Emmanuel Macron.
President Trump is on record as having threatened both Canada and France with higher tariffs unless they change policies that he believes are unfair and unbalanced to the United States.
Prior to Trump leaving for the G7 summit, he told reporters that “We’re going to deal with the unfair trade practices. If you look at what Canada, Mexico, European Union all of them have been doing to use for many decades, we have to change that.”
As reported in MarketWatch, “French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau, angered by President Donald Trump’s tariffs on steel and aluminum, have signaled that they will no longer try to cajole him and are prepared to form the agenda for the global economy without him. Their stance raises questions about the future of the informal group that has set the agenda for the global economy since the 1970s.”
This meeting will be the first of three significant events occurring over the next week with the United States-North Korean summit set to commence on June 12, and the Federal Reserve’s FOMC meeting to conclude the following day on June 13.
Although it is highly anticipated that next week’s FOMC meeting will result in an interest rate hike (according to the CME’s fed watch tool there is a 91.3% probability of a rate hike), it is the U.S.-North Korean summit that contains the most enormous amount of pure uncertainty of any of these events.
It was highly expected that there would be extreme friction between the United States and the other members of the Group of Seven, and a rate hike by the Fed is perceived as almost a certainty. However, the outcome of next week’s summit in Singapore is unknown and could result in the surprising repercussions affecting both the financial markets and geopolitical fabric.
For now, the financial markets are reacting as if it is the quiet before the storm with the safe-haven asset gold moving fractionally higher, and the U.S. dollar and U.S. equities having modest gains on the day. Next week certainly has a potential to break the current muted action evident in the financial markets.
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Wishing you as always, good trading,