The Japanese Yen outperformed in Asia Pacific trade, retracing some of the prior session’s standout losses. On the other side of the spectrum, the Australian Dollar underperformed as prices corrected lower following yesterday’s outsized gains.

The rest of the G10 FX space was mired in consolidation mode as the absence of top-tier scheduled event risk offered traders a bit of room to reflect. That may translate into risk aversion in the hours ahead as their thoughts turn to the G7 leaders’ summit starting in Quebec on Friday.

The meeting will mark a showdown between US President Trump and his counterparts after he opted to let lapse aluminum and steel tariff exemptions for Canada and the European Union. The markets have taken a sanguine view of the dust-up so far. That may soon change.

The prevailing view seems to be that Mr. Trump’s aggressive posture is little more than smoke and mirrors. Behind the rhetoric, investors see a desire to make a deal that the cocksure President can then claim as a victory for his brand of swaggering diplomacy.

That may very well be true, but other world leaders might not be willing to appear as though they’ve succumbed to pressure from Washington even if they extract a decent bargain in the process. Instead, they may use the rare opportunity for broad consensus to single out the US and push back forcefully.

Weighing up such scenarios (and no doubt many others), traders might conclude that the meeting carries with it enough uncertainty risk to be concerned about. That could translate into a preemptive reduction of exposure to sentiment-linked assets.

In this scenario, the US Dollar may find renewed support form haven-seeking capital flows while the Yen turns corrective gains into a larger up move. Commodity bloc currencies’ sensitivity to the markets’ mood might make them most vulnerable if it sours.

ASIA PACIFIC TRADING SESSION

EUROPEAN TRADING SESSION

** All times listed in GMT. See the full economic calendar here.