MORNING BRIEFING: G20 outcome fails to impress forex markets

[RTFX-Trading]

MORNING BRIEFING: G20 outcome fails to impress forex markets

[B][I][U]What’s new:[/U][/I][/B]
G20: Diverging paths to fiscal consolidation but common specific targets
G20: Japanese current fiscal situation acknowledged as the exception
Japan: Retail sales data come below expectations
New Zealand: NZD suffers as business confidence data shows decline
EURUSD: Range-bound morning trading; attention shifting to US economic recovery

[B][I][U]Today:[/U][/I][/B]
[IMG]http://www.rtfx.com/images/news/CALEN280610.gif[/IMG]


[B][I][U]Rates in Asia and Indices: [/U][/I][/B]
EURUSD: 1.2397 - 1.2351.
USDCHF: 1.0944- 1.0890.
GBPUSD: 1.5072 - 1.5020.
EURJPY: 110.82 – 110.38.
USDJPY: 89.45 – 89.27.
DowJones: 10'143.81 -0.09%
NASDAQ: 2'223.48 +0.27%
S & P 500: 1'076.76 +0.29%
Nikkei: 9’693.94 -0.45%
Shanghai: 2'535.27 -0.69%
Gold: $ 1'254.10
Crude Oil: $ 78.66


[B][I][U]Comments: [/U][/I][/B]

Currency markets reaction to G20 outcome seems to have been muted this morning. Despite hanging on to their own path for cutting budget deficits, G20 leaders have communicated their vow to halve fiscal deficits by 2013 and to ensure that public debt as a percentage of GDP stabilizes or declines by 2016. These are very specific targets as opposed to previous generic statements. They acknowledged the risk this might have on short term economic recovery, but highlighted the necessity to restore confidence and longer term stability.

It was pointed out that Japan’s situation was different in nature, and meeting the mentioned specific debt reduction targets would be impossible – the Japanese government committed to eliminating fiscal deficit by 2020, which was welcomed and understandable. G20 Countries with greater deficit agreed to boost savings whilst the other export oriented countries agreed to foster more domestic growth to reduce their reliance on exports. As expected no consensus was reached for the bank levy.

In the 2nd largest economy; Japanese retail sales data was disappointing as figures were weaker than expected. Analysts have expressed the possibility that the previous boost in sales was helped by government subsidies which effect is starting to slow as they are expected to expire later on this year.

In New Zealand data for business confidence fell, suggesting that the central bank would be more cautious in raising interest rates. As a result of the NZD was losing support this morning.

EURUSD traded in a tight range as trading was limited in between 1.2351 to 1.2397 which levels are the respective low and high for this morning. It seems that as some of the attention for Euro Zone Debt problems shifts to US economic recovery, the US Dollar suffers from cuts in long positions and the Euro is managing to hold on to its gains.



Good day,



Rudolf Muscat
Trading desk

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