Posts belonging to Category G20

UK’s retail sales figures continue to disappoint

More doom and gloom last week for the U.K. with Retail Sales figures coming in largely under consensus showing a second straight contraction in the figure.UK's retail sales figures continue to disappointIn contrast, as markets continued to soar, we also saw strength returning to the US Dollar after a disappointing start to the week. the

GBP/USD fell below 1.55 for the first time this year. GBP/EUR continued to fall in the opposite direction again struggling to stay about 1.16 and an uneventful week for EUR/USD battling to stay above 1.33.

As the U.K. continues to struggle with high inflation and low to non-existent growth we have Wednesday’s claimant count that is expected to show more positive news on joblessness with the figure contracting again.

Also, the MPC minutes will be released on Wednesday to see the voting from the last interest rate meeting with last week’s inflation report it will be interesting to see if the committee is leaning towards more QE.

Over the weekend, the G-20 Summit in Moscow ended on Saturday with apparent thumbs up for “un-intentional” and no direct weakening of currency rates as part of wider monetary policies.

On the other sode of the pond we have a potentially quiet week this week for the US Dollar with Wednesday’s FOMC meeting minutes being released to see how sentiment is towards the continued monetary policy currently in place and whether or not the Federal Reserve will continue on its current course until the end of 2013.

On Thursday, inflation was expected to have increased with US Existing Home Sales expected to have fallen back again as the property market struggles to get back on its feet.

UK loans IMF £10 billion

The UK has offered just under £10 billion in loans to the International Monetary Fund (IMF) to help economies in trouble.UK loans IMF £10 billionIt is part of a global effort to bolster the fund’s lending capacity, which IMF managing director Christine Lagarde wanted to increase by £250 billion ($400 billion).

The UK is not alone in funding the lifeboat. Japan will contribute $60 billion, Australia $7 billion, Singapore $4 billion and the Republic of Korea $15 billion.

The IMF had already received commitments of $320 billion.

Finance ministers from the G20 group of leading economies discussed boosting the IMF’s resources at a meeting in Washington.

Mr Osborne said the loan was important to the UK: “It’s in Britain’s interest that we have a stable and strong world economy – that creates jobs in Britain.”

He added that any loan made would bring in a return in the form of interest.

He can lend up to £10 billion without parliamentary approval because Parliament has previously approved £40 billion of loans, of which only £30 billion has so far been committed.

But this latest pledge is unpopular with some members of Mr Osborne’s Conservative Party, who had been urging him not to sign up to an increase.

Backbench MP Peter Bone described the decision as “bonkers”, describing any efforts to prop up the eurozone as a waste of time.

The UK Independence Party leader, Nigel Farage, said: “[Mr] Osborne must tell the IMF that he will not donate one more penny piece to the failed euro bailouts.”

The Treasury says its contribution to the IMF is not public spending. All UK loans to the IMF are financed from the UK’s Official Reserves, remain UK assets and do not contribute to public sector net debt.

The IMF hopes that if private investors think that countries in trouble can be rescued if necessary, they will be more willing to lend to them and any funding problems will not escalate.

It has already warned that the eurozone’s debt crisis poses the biggest threat to the global economy, and warnings about Europe are expected to top the eventual communique from the meetings.

IMF waiting for European lead

This week is likely to be a much calmer and quieter affair in comparison to last week which brought the ongoing Greek debt crisis to a close for the short term. IMF waiting for European leadWhether this will last remains to be seen as the struggling nation will have to renew future debt deadlines in addition to steering through an election in April.

Expect the euro to trade in limbo as traders decide on their view over how successful this latest deal will be.

Comments have been coming thick and fast from finance minsters around the world with statements ranging from ultra positive to cautious.

The G20 met in Mexico over the weekend with the topic of Euro contagion at the top of the agenda.

The eurozone countries pledged to reassess the strength of their bailout fund in March, which would clear the way for other G20 countries to contribute via the International Monetary Fund.

The G20 said “This will provide an essential input in our ongoing consideration to mobilise resources to the IMF”.

Data this week comes mainly from the States with US durable goods orders on Tuesday, GDP on Wednesday and jobless claims on Thursday.

The US government will be expecting positive figures across the board as they continue to spend their way out of recession to attract growth.

G20 meeting sparks optimism

The G20 finance ministers start a two day meeting today and the main point on the agenda is to tackle Europe’s debt woes.  G20 meeting sparks optimismThe Euro has pushed higher on the expectation that the meeting will help boost the IMF’s lending resources.

Yesterday the euro slipped back into risk off mode as equities slumped and banks again came under pressure- today the G20 has turned the mood, hopefully they can back it up with solutions.

By the end of this month a plan is set to be announced on Europe and the market is pricing in a credible and concrete plan currently, however the proof will be in the pudding.

The Euro initially came under pressure as S&P again downgraded Spain by one notch to AA- and placed them on negative outlook.

The EUR/USD slipped 40 pips on this news but then steadied and turned the loss to a gain as the expectation of G20 help for the Eurozone lifted the single currency.

High yielding and commodity currencies are benefitting form the expected progress on Europe- the AUD and NZD in particular have posted weekly gains.

Today apart from the G20 meeting there is not too much on the agenda.

Later today we have US retail sales and the market will be looking for a number in line or hopefully better than expected.

Last week the non-farm number was not as bad as expected and this led to optimism in the markets and we are looking for a similar outcome today.

Politics rules the money markets at the moment

Currency conflicts at the G20 gathering in Nanjing continue to undermine markets with the obvious divisions between member nations on the way forward causing the very moves that participants are looking to correct. Politics rules the money markets at the momentThe US, through Tim Geithner, maintain their attack on the Chinese policy of not allowing its currency to float freely, arguing that to adopt such a move would enable the Yuan to take on a much more high profile global role.

He adds that becoming a constituent of the IMF’s currency basket would be the clear evolution.

The European delegates remain wary of further Dollar strength with the French President, M. Sarkozy summing up the concern when he argued against the Euro, or any other currency, usurping the Greenback role as the global reserve medium.

He added that recent Euro strength versus the Dollar was unjustified.

Overnight, we saw the stronger Dollar from the last few days give up some of its gains on comments from Federal Reserve member Bullard clarifying his reported remarks from the day before.

He said that there is no consensus on the FOMC about ending QE2 early, and that this is unlikely to take place.

He also said that the Federal Reserve would be able to tighten policy by not necessarily pushing up official rates, but by starting to sell back assets adding that this cycle of tightening would be far more difficult to manage.

The weaker Dollar / stronger Euro scenario was further enhanced by yet more comments from ECB Board members, Bini-Smaghi and Stark who both cemented in the probability of a rise in the official Euro interest rate at next week’s regular meeting.

The former talked of rates being returned to normal levels in a “gradual way” whilst Stark pointed out the fact that policy rates at present levels were exceptionally low.