Will G8 Meeting Impact Currencies?

Last updated 6/12/2009 4:24 AM ET (GMT -5) 7 Comments

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Boris Schlossberg

Director of Currency Research, GFT

The G8 meeting of finance ministers to be held in Lecce Italy this Friday and Saturday, promises to offer few headlines for the currency market, but renewed concerns about the escalating price of oil may put damper on what has been a marked improvement in economic activity since members met last year.  

The G8 communiqué is not expected to make any fresh commentary on foreign exchange with the exception of the usual statement that volatility is not desired. However, the sharp rise in the price oil could merit some attention from the finance ministers. UK Chancellor of Exchequer Alistair Darling noted that the rising price "has the potential to be a huge problem as far as the recovery is concerned." The doubling of oil prices in recent months has yet to fully impact consumer spending  in the G-8 universe. However if price were to remain above the $70/bbl - or worse head towards $80/bbl, grabbing an ever higher percentage of disposable income, the nascent recovery in industrialized nations could come to a grinding halt.

Nevertheless, the overall tone of the meeting is expected to be congratulatory as economic conditions for G8 member states improved radically since the start of this year when the industrialized world was facing it worst economic crisis since World War II. One of other key point of interest may be the discussion of stress tests of European banks which have so far provided little transparency to investors. European banks have  massive exposure to the East European market and often operate at higher leverage than their US counterparts. Any renewed focus on the problem could trigger some selling of EUR/USD after the week-end especially if there  is any hint of widening  credit losses in that sector.

Comments (7)

Graham. H

June 12, 2009 at 04:41 AM ET

I guess I will have to wait until the weekend to find out what has actually been covered in the meeting. or will there be any further commentary on its content & outcomes before trade commences on Monday? :)

bschlossberg

June 12, 2009 at 04:55 AM ET

We wont know until end of day Saturday. You should monitor the wires

Graham. H

June 12, 2009 at 05:05 AM ET

ok thanks for the tip. It also looks like the Industrial Production m/m might have just given the euro the downward kick it needed to make up its mind

xbsassets

June 12, 2009 at 05:06 AM ET

Thanks boris for the commentary.....

sandman

June 12, 2009 at 09:53 AM ET

USD.Yen advanced against the euro and the yen after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable” and that the currency’s global status is safe.
resist 98.42 then 98.80

prefer range trading 97.30-98.80

bschlossberg

June 12, 2009 at 10:09 AM ET

Sentiment against risk currencies definitely changed today and I think it may be a multi day correction

Graham. H

June 12, 2009 at 11:23 AM ET

yes I agree, however there still seems to be quite alot of support levels slowing the decline

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.