G20 Comments on Currency Prices
Posted by Mulder Venture at 4:13 am
In the aftermath of the G20 meeting it seems that policy makers are still clearly disturbed about the state of exchange rates. In the last few days we have heard choirs of high profile complaints against currency strength. With the EURCHF trading around the 1.5100 level, markets should be focused on the recent SNB comments, which forcefully defend action (not a “beggar-thy-neighbor” strategy) while staying committed to their current interventionist policy.In Canada, BoC Governor Carney reiterated that long term persistent strength of the CAD would be negative for the Canadian economy and prolong soft inflation figures.
While yesterday ECB’s Trichet and Nowotny both said a strong USD is “important” for the global economy. Perhaps the most interesting, while confusing, would be the comments from Japan. Overnight new Minister of Finance Hirohisa Fujii seems to be backtracking from recent comments and now has expressed some displeasure at JPY moves but also declined to commit to intervention, stating the market had twisted his earlier statements. In the last 24hr Fujii has said “We are watching FX moves closely” and “FX intervention is possible under extreme circumstances.”
On the other side, Prime Minister Hatoyama stated that the JPY rise is already hurting small companies, hinting that the new government will probably not permit the Yen to appreciate forever. Sounds like the historical goverment policy of a weak JPY is returning.
These comments have created considerable distortion in the FX markets and traders would be advised to watch out for continued verbal intervention. Wall Street was able to close on a high note and for the most part Asian regional indexes follow (lone exception Shanghai -0.21%). The rally in risk appetite feels light with only a slight rebound in risk correlated trades. Yesterday’s economic calendar was light, while today we have couple of releases, which could move the markets. The UK Q2 GDP turned out to a nonevent, printing at -5.5% y/y vs. -5.4% exp, -0.6% q/q vs -0.6% exp.
And from the Eurzone September’s increase in economic sentiment to its highest level in a year is another good sign that the domestic economy continues to recover. Economic sentiment, jumped to 82.8 from 80.8 , a touch higher than expected . From the US we’re awaiting S&P/Case-Shiller Composite-20 Y/Y Jul house price index and the consumer confidence for September.
Loading ...
