Friday, September 23, 2011

G20 spurred risk-on sentiment for some time

The Group of 20 has managed to encourage the markets: the nations pledged “strong and coordinated” response to the problems of the global economy, among which G20 named such factors as “heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment”, says the statement released in Washington.

The comments of the world’s largest economies have improved investors’ confidence and risk sentiment. The single currency advanced from the 10-year minimum versus Japanese yen. Euro has also risen from the 8-month minimum versus the greenback on the rumors that Asian central banks bought EUR/USD. Australian and New Zealand dollars found support and rebounded encourages by rising Asian stocks.

At the same time, analysts at Standard Chartered point out that no concrete steps were actually announced, so the market’s optimism might soon fade. In their view, there has to be some kind of mechanism that will allow European Financial Stability Facility (ESFS) to expand, which seems unlikely at the moment.

Now it’s necessary to watch the IMF-World Bank Annual Meetings take place on September 23-2011.

daily eurjpy 11-19

Chart. Daily EUR/JPY

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