Waiting for the G20 to begin..
Currency markets are a little quieter this morning with many investors cautiously waiting for the details coming out of the meeting of finance ministers from the G20 group in South Korea starting today. There has been some talk about a currency agreement being thrashed out although this seems highly unlikely given that these events often end with little or no clear conclusion. Two things that will definitely be on the agenda are China’s intervention in the currency market keeping a lid on the upward pressure of the Yuan and the historically low interest rates in much of the developed world which causes upward pressure on the emerging economies that often rely on exports. These tensions would be stoked with the extra QE that both the UK and the US are considering.
Yesterday was another poor day for the proud pound with retail sales coming in at a worse than expected 0.5%. This coupled with the better than expected data out for Germany yesterday morning saw GBP/EUR at its lowest level since the spring.
Other than this morning’s German IFO data, an early indicator of business condition, coming in better than expected we have no data out today. Trading is most likely to be very quiet until we start hearing noises from the G20 meeting. Sterling looks like it will be under pressure from both the Euro and the USD for the remainder of the day.