Friday June 1, 2012 - 15:33:31 GMT
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G7 Coordinated Monetary Policy Action Sunday Night? (FXA)
G7 Coordinated Monetary Policy Action Sunday Night?
Plausible, and might even be likely. But it presupposes that officials get the scope and nature of the crisis and I am not so sure they do. If the past is any guide to the present much less future I would say not.
Risk is now rallying on talk the Fed will launch QE3 at the weekend after jobs data and in light of how rapidly Europe’s financial system is unraveling in the periphery (knocking on the door of the core) and collapse in real economic activity across the Euro Zone if most deeply in periphery.
But the Fed can’t lead a policy easing based on European developments. ECB must move first or with the Fed. Only way to get something going to support risk is for c banks this weekend to move in a joint fashion. ECB cuts, LTROs, Fed announces QE3, BOE announces more QE, BOJ increases asset purchases and BOC cuts rates. Odds on this – 20% IMHO.
If there is a joint c bank move Sunday night, I don’t think it is end game for the crisis – checkmate on preventing a euro unraveling. It will be an opportunity for many people still long risk to exit at less worse levels. Plenty more to go in the crisis and real solutions have to come from governments not c banks.
David Gilmore
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