Forex Trading: No Specifics At G7 On Forex Or Sovereign Crisis

“We expect and we are confident that the Greek government will take all the decisions that will permit it to reach that goal,” Trichet said. A statement made earlier, but reiterated by EU members of the G7 this weekend. In addition, EU members spent time trying to reassure non-EU members that Greece’s (Portugal ’s, Spain etc) fiscal problems can be solved without the help of external bodies such as the IMF. However, judging from recent price action, this rhetoric hasn’t helped ease the markets concerns.

Rumors and tittle-tattle continue to swirl around the sovereign credit issue such as the Bundesbank preparing a loan for Greece and secret ECB weekend meetings, all keeping EUR traders on their toes. ECB Economist Stark comments, that a new mechanism which would support individual EU countries was incompatible with current rules, weighted on the EUR, as many believe some sort of bailout or stability fund will be needed. CFTC data imply that traders continue to trim long risk correlated trades and have become negative on the EUR (net shorts against the USD rose to 43.7 from 39.5k, the largest short recorded by the CFTC since the EUR inception).

The mixed US labor data released on Friday highlights a critical dimension to PIIGS fiscals’ worries. The fiscal strategy put forth by Greece and whole heartily accepted by the European Commission last week, hinges heavily on the global recovery, specifically in the US and China.

Should these countries stagnate or potentially take another economic dip lower, significantly increases the probability that risk counties will be unable to reach their Debt to GDP cutting goals. We still expect concerns over the EU to weigh on the EUR and benefit the USD and JPY. However, with a light economic calendar till Wednesday we could expect bargain hunters to push risk correlated trades slightly higher. The G7 meeting, this weekend in Canada, proved to be a non-event, reinforcing the fact that this group lacks modern relevance. While no official communiqué was released, individually ministers referred to the October statement regarding FX.

October’s wording said that “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange markets closely, and cooperate as appropriate.” Not quite the strong and assured guidance a very nervous market was hoping for.