G7 to Monitor Markets

Forex traders had been watching the G7 meeting held in Rome last weekend with great interest. All reports indicate that currencies were not discussed to any great length although the Chinese Yuan was mentioned. Forex traders learned that the group of central bankers and finance ministers will monitor foreign exchange markets and will take appropriate action. The statement was almost identical to one the group issued in October 2008.

Yen, Pound Discussed

Of interest to Forex traders is the news that European officials expressed concern over statements by the Japanese government that they would intervene in currency markets. There was also concern over the weakness of the British Pound which makes exporters in the Euro Zone to compete with their British competitors. They also noted that the volatility of the British Pound and the Japanese Yen had declined in recent weeks. Joaquin Almunia, European Economic Affairs Commissioner stated, “We see that volatility has increased…but taking into account the present levels of the different currencies we are now closer to normal values of those currencies than we were a few months ago.”

Possible Intervention

Of further interest to Forex traders was the news that the group warned against excessive market swings. A statement released by the group clearly stated, “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange rate markets closely, and cooperate as appropriate.”  While most of the group’s statements were in general terms many Forex traders and investors are concerned by government interventions into currency markets.

French Economy Minister Christine Lagarde said that the Bank of England should take appropriate action to address the weak pound but British finance minister Alistair Darling stated that, “Britain has a policy of targeting inflation, not the exchange rate.”

Stimulus Measures to Take Time

Forex traders took note of statements by the group that indicated that the recession will last through 2009 and any stimulus measures by governments would take time before they took effect. Forex trading has been a tricky business lately and as always education, patience, and discipline are the keys to success for Forex traders.