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G20 Fail to satisfy markets on Immediate Measures

G20 Fail to satisfy markets on Immediate Measures ….

The results from the G20 meeting are at first sight disappointing. Barack Obama didn't show, there was no mention of further co-ordinated monetary easing and no agreement on the wisdom of a large global fiscal stimulus. Only an agreement to lay out a work plan, to be finalised before the next get-together in April next year, to strengthen the oversight and regulation of Financial Institutions. Although this is an important exercise to convince people that Governments will now allow this type of mess to reoccur, the very nature of the proposed plan must be flawed. It is very unlikely that the ‘next crisis' will be of the same type as the current one yet regulation will only be introduced that tackles the current crisis. I still think that further monetary easing had been discussed pre-Washington and that we are likely to see moves in interest rates this month. The next official rate meeting is in Japan on Friday but with their rates already at 0.3%, no change is expected.

Talking of Japan, they are the latest sovereign state to admit slipping into recession following the declaration of the 2nd consecutive negative GDP figure. No surprises here and little reaction on the exchanges. The Bank of France have followed the trend, predicting that 4th Qtr French GDP will come in at -0.5%. In fact, global data on growth, consumer demand and inflation has recently become very predictable and effects on markets minimal. The next big reaction will undoubtedly come from positive news from one of the major economies – only not just yet. This leads nicely onto pontificating whether Sterling has fallen enough against the Euro especially to enable the UK's potentially massive trading advantage to have an effect on manufacturing and exports and hence the value of the Pound. Over the months to come, more and more pundits are going to be trying to pick the base of the exchange rate and eventually someone will be right. These levels do look fantastically cheap and assuming that Gordon Brown and Alistair Darling have got their sums right and also correctly predicted the mood of the country then lower rates could be seriously viewed as a plus point for Sterling.

Lots of economic data scheduled for this week but most of it falls into the category above ie we need something very positive to shake the current forex levels and money market adjustments.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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