LONDON Try as they might, G20 nations in the German spa town of Baden-Baden could not persuade U.S. Treasury Secretary Steven Mnuchin at the weekend to agree to a joint pledge to resist protectionism so the phrase in question - a fixture of G20 communiques for a decade - was dropped.
This was something of a defeat for the German hosts but more significantly a marker of where the world's top economy currently stands under the Donald Trump administration. There was some willingness at the meeting to cut Mnuchin some slack and hope the stance of the Trump's still very new team will evolve between now and the July summit of G20 leaders in Hamburg. In the meantime there was relief that the first encounter with Mnuchin had been non-confrontational and that standard G20 promises to avoid competitive currency devaluations had been kept in.
The top five candidates in France's presidential election will be on the same stage for the first time for a televised debate tonight.
The marathon event - it will last around three hours - may be a final chance for the once-favourite Francois Fillon to make up ground lost in a nepotism scandal. It will also be an opportunity for Emmanuel Macron, who has now crept ahead of far-right leader Marine Le Pen in a poll of first-round voting intentions, to persuade viewers he is not as light on policy as his rivals suggest.
Security will no doubt play a big part of the debate after the weekend's near-miss at Orly airport in Paris, when police shot dead a man shouting he wanted to "die for Allah" after he tried to snatch a gun from a soldier.
MARKETS AT 0755 GMT
The G20’s failure to agree to “resist all forms of protectionism” was the headline of the meeting of finance ministers and central bankers. In practice, it was the Trump administration reserving the right to use trade barriers or border taxes to protect U.S. companies and jobs and vetoing the existing wording in the statement. As such, the threat to global free trade and the potential for a series of retaliatory measures is a negative for world growth and markets and the flipside of the as-yet undetailed Trump stimulus plan.
The impact on the dollar is harder to figure. Border taxes and tariffs to drive down U.S. trade deficits would, all things equal, be expected to lift the dollar. But a higher dollar will work against balancing the trade account. Combining trade measures with a fiscal stimulus and higher interest rates would then appear to be only dollar positive, unless the administration can somehow keep talking the dollar down or row back on either its trade threats or stimulus plans.
The dollar has slipped back a touch since the weekend, down about 0.2 pct on its index and sending euro/dollar back up toward last week’s highs just under $1.08. The two main focuses in Europe on Monday will be the TV debate amongst French presidential candidates to see if the current favourite, independent centrist Macron, can sustain his lead over Le Pen. The euro was helped last week after the Dutch election saw far right, anti-immigrant Geert Wilders and his party well beaten into second place by the party of incumbent Prime Minister Mark Rutte.
The other lift for the euro was a shift in euro interest rate futures to assume an interest rate rise from the European Central Bank as soon as December this year amid reports the ECB debated whether to lift rates before ending its existing bond buying programme. Bundesbank chief Jens Weidmann speaks later today.
The euro group finance ministers also gather, with the latest standoff over the Greek bailout programme and 2017 budget plans topping their agenda.
Sterling was firmer meantime after a hawkish interpretation of the Bank of England’s latest meeting and a speech by BoE chief economist Andrew Haldane later will be watched closely for further clues.
Asia stock markets had a mixed session earlier, with gains in Shanghai and Hong Kong offset by losses in Tokyo, Seoul and Jakarta. European stocks are expected to open lower, with eyes on Deutsche Bank as it sets the terms for its 8 billion euro cash call.
(Editing by Toby Chopra)