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Traders seemed to feel uneasy ahead of the G20 Summit due to – yep, you guessed it – resurfacing trade jitters from Trump’s remarks.

Dollar bulls seemed to take the FOMC minutes with a grain of salt after Powell’s earlier “just below” neutral remarks. U.S. data also came in mixed.

  • Canadian current account deficit narrowed from 16.7B CAD to 10.3B CAD
  • U.S. core PCE price index dipped from 0.2% to 0.1% vs. 0.2% consensus
  • U.S. personal spending up 0.6% vs. 0.4% forecast, 0.2% previous
  • Personal income up 0.5% vs. 0.4% forecast, 0.2% previous
  • U.S. initial jobless claims up from 224K to 234K vs. 221K forecast
  • U.S. pending home sales sank 2.6% vs. estimated 0.8% gain, 0.7% previous
  • FOMC minutes: Almost all members saw another rate hike needed “fairly soon”
  • FOMC: Language on “further gradual increases” may need to be revised
  • New Zealand building consents rebounded 1.5% from earlier 1.3% slump

Major Events/Reports:

Mixed U.S. data

Uncle Sam’s latest batch of economic reports came in a mix of red and green, casting more doubts that the Fed can keep up its aggressive pace of tightening.

The core PCE price index, which is said to be the Fed’s preferred inflation measure, ticked lower from 0.2% to 0.1% to reflect weaker price pressures. This brings the annual rate to 1.8% versus expectations at 1.9%, still a couple of notches below the 2% inflation target.

Pending home sales also turned out to be a disappointment as the report printed a 2.6% slide instead of the estimated 0.8% gain. According to the chief economist of the National Association of Realtors, this was mostly due to higher mortgage rates that “reduced the eligible pool of homebuyers.” In other words, the Fed’s recent hikes are starting to bite into the housing market!

Initial jobless claims rose from 224K to 234K versus expectations of a decline to 221K, signaling that joblessness remains elevated.

On a less downbeat note, personal spending and income both came in better than expected. The former showed a 0.6% gain versus the estimated 0.4% increase while the latter rose 0.5% versus the projected 0.4% uptick. These figures were also stronger compared to the earlier 0.2% gains for both.

FOMC minutes

The minutes of the latest Fed monetary policy huddle still seemed to support a December hike but hinted at a slower pace of tightening next year. It noted:

“[A]lmost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon…”

Of course this depends on whether or not inflation and employment figures are meet or beat their expectations. Also, a couple of members – three guesses who – expressed uncertainty about the timing of tightening since rates might “currently be near its neutral level.”  

Still, FOMC members suggested that a change to their line on ‘further gradual increases’ in the target range might be needed in order to emphasize data-dependence.

As for downside risks, policymakers pointed to “high levels of uncertainty regarding the effects of fiscal and trade policies on economic activity and inflation.” Upside risks from “greater-than-expected effects of fiscal stimulus and high consumer confidence” were also highlighted, though.

Trade, Trump, tariffs

The POTUS’ moves ahead of the G20 Summit seemed to spur some jitters in the markets as he said that he is close to doing something with China on trade but he doesn’t know if he wants to do it. He also said:

“I will tell you that I think China wants to make a deal, I’m hoping to make it a deal but, frankly, I like the deal we have right now.”

After boarding the plane to Buenos Aires for the summit, he announced on Twitter that he would cancel his meeting with Putin.

A reporter on Air Force One also shared that the Donald has canceled formal meetings with Turkey and South Korea as he will just speak with leaders informally during the summit instead.

Risk appetite wobbles

Wall Street was actually in the green early in the session, possibly still finding support from the prospect of slower Fed tightening in 2019, but indices fell back in the red on G20 uncertainty.

  • Dow 30 index is down 27.59 points to 25,338.84 (-0.11%)
  • Nasdaq is down 18.51 points to 7,273.08 (-0.25%)
  • S&P 500 index is down 5.99 points to 2,737.80 (-0.22%)

Crude oil appeared poised for more losses then staged a massive rebound when news broke out that Russia might be willing to curb output also. WTI crude oil initially dipped below the $50 per barrel mark to a low of $49.41 per barrel then shot up more than 2% to $51.40 per barrel.

Major Market Mover(s):

USD

The scrilla had a lot of tossing and turning for the session as it was pulled around in different directions. Market participants seemed to have found hawkish and dovish hints from the FOMC minutes while Trump’s pre-G20 actions kept traders on edge.

USD/JPY pulled up from 113.18 to a high of 113.55; EUR/USD also moved slightly higher to 1.1392; GBP/USD bounced off the 1.2750 area to 1.2797; USD/CHF is up to .9974, and AUD/USD is down to .7302.

Watch Out For:

  • 11:30 pm GMT: Tokyo core CPI y/y (increase from 1.0% to 1.1% expected)
  • 11:30 pm GMT: Japanese unemployment rate (no change from 2.3% eyed)
  • 12:30 am GMT: Chinese official manufacturing PMI (no change from 50.2 eyed)
  • 12:30 am GMT: Chinese official non-manufacturing PMI (dip from 53.9 to 53.8 expected)
  • 5:00 am GMT: Japanese consumer confidence index (improvement from 43.0 to 43.3 expected)