With all the headline risk from central bank and G-20 meetings this week, it's no wonder traders are taking refuge in the yen. The Fed will be metered for hawkishness as it raises rates and the Bank of England’s policy meeting will be scrutinized for any pushback on a May hike already 80% priced into the market. The G-20 meeting in Buenos Aires will be tense amid looming trade conflicts. Oh, and with Yi Gang named as the new PBOC governor, investors will be analyzing what the appointment means. China watchers see him as a pro-market and pro-reform choice and the fact that the the yuan is beating all major currencies today apart from the yen suggests the market likes what it heard.
The Fed may turn out to be a more dovish event for U.S. Treasuries than many envisage, given the sluggish wage growth in the latest data. The G-20 meeting is taking place as trade tension escalates between the U.S. and China. The original plan was to discuss regulations and cryptocurrencies but that may change given what’s going. The currency market is probably the cleanest way to bet on the outcome. Given that the yen is the top performer today suggests investors aren't convinced the meeting will do much to defuse trade wars.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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