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Lots on the agenda this week; the main focus will be the G20 summit, ECB rate decision and US non farm payroll data. The G20 summit will take place in London amid difficult economic times and a call for a unified response to the economic downturn. Many argue that the summit will be a huge disappointment and anti-climax with rhetoric not mobilizing into action; on the other hand it is an opportunity to regulate global finance and show a unified response to the economic downturn.
On Thursday we see the ECB rate policy meeting with the expectation of a 50 basis point cut; again the main focus will be on Trichet’s comments after the decision, the key aspect being whether he will opt for unconventional measures and further easing… Vice-President Papademos commented last week that the central bank may decide to buy corporate bonds. If any escalation in this regard then look for a sharp sell off in the euro.
Looking at the fx markets we have seen the pound weaken against the USD back under 1.42 as Weaker GDP and a higher current account deficit than forecast put the pound under pressure. The US dollar has also gained significantly against the euro as it recovers its poise from last weeks sharp sell off- one driver for a stronger dollar is the expectation that the USD will remain as the worlds main reserve currency for some time to come. On Friday, look for key data in relation to US non-farm payrolls which may show a fall 700,000 in February- this would be the largest drop since the 834,000 decline in October 1949.
Discuss on this on the Currency Exchange Forum
March 30, 2009 @ 9:59 pm
It will be a very interesting week… ECB, first intervention in the Spanish banking system during this crisis (will it expand and then move to France and/or Germany?), and the G20… thanks
March 31, 2009 @ 7:04 am
Is this the beginning of the creation of a world bank? a single bank that controls every other banks in all countries.
March 31, 2009 @ 9:07 am
Michaelg, I don’t think creating a world bank will be the solution… It does seem however that banking should become a “public service” in each country, at least for the coming years… The “Ministry of Banking”? Minister of Banking? Once this is over we can go back to banking in the private sector…
March 31, 2009 @ 9:57 am
Nash. I am NOT for a world bank. Having a minister of banking might be the way to go, but the people behind the banks, have way too much power/influence that the minister will end up working for them. So the quest continues for a solution.
March 31, 2009 @ 10:34 am
For me a world bank would be the wrong move…trusting one central entity is equivalent to putting all the eggs in one basket. there is a need however to have uniformed controls that are enforced on a global scale..
March 31, 2009 @ 11:25 am
Then a global banking rule sheet might be the answer. A set of RULES not guidelines that all banks must follow. The “management team” of banks caught breaking any of these rules should be held accountable (strip bear of all their family’s assets - 4 generation up or down). - Umm sounds really harsh.
March 31, 2009 @ 1:18 pm
Phil I agree. Provisioning in your balance sheet a percentage of your loan book must be a MUST across the globe. Credit rating agencies must be really independent, and have some sort of public/private partnership structures. However I still think the main problem is that banks are proving to be very inefficient distribution networks of liquidity in these difficult times. I think that until that is resolved regulation is not the answer. Hence my opinion that public “facilitation” (not intervention in teh strict sense) should be the answer.
Michaelg, I know where your coming from, but bankers are a “necessary evil” What they require is to have more independet non executive board members that truly provide objectivity, and a separate board supervising regulatory compliance and balance sheet risk.