The market seems fairly stable today as investors are hesitant to take out positions ahead of this weekend’s G20 meeting between the world’s financial leaders.
The US is raising the stakes in calling for countries to avoid using their currencies to gain economic advantage. US Treasury Secretary Tim Geithner, in a letter to the G20 finance pointed out that ‘emerging economies with undervalued currencies and solid reserves must allow their currencies to adjust in line with fundamentals.’ Of course, every financial leader of emerging economies will be looking to poopoo this as a weaker currency makes their exports much more attractive.
Leaders of more developed economies will be looking to strike some kind of accord to secure this agreement in principle, however pushing it through will be a lot harder in practice. It is highly unlikely that a binding agreement will be reached this weekend as heads of the developing economies will protest about the ability of countries such as the US and the UK to structure huge bailout packages.
In other news, sterling’s decline continues as it faces a sixth straight week lower against the euro. With the downward pressure associated with that fateful phrase “quantitative easing” in the UK and US showing little signs of abating, this trend is set to continue at least ahead of the Fed’s Nov 3rd meeting. Maybe if the French can protest for long enough, the eurozone’s debt issues will take their rightful place at the fore of the market’s focus.
Have a good weekend!
Tom Hampton
Analyst – Caxton FX
