Tuesday June 5, 2012 - 10:53:56 GMT
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G7 Conference Call at 1100GMT...Look for Communiqué (FXA)
G7 Conference Call at 1100GMT...Look for Communiqué
On G7 conference call the very public announcement of the event (arguably forced by Canadian Finance Minister Flaherty's revelation Monday of the meeting) suggests a statement will be issued at the end of the conference call...some formal communication to markets aimed at restoring confidence in the capacity for policy makers to coordinate an effective response. But as far as specific actions it will leave those details until the time it is needed – G7 will I think only act in response to a crisis and not to prevent one. I would be very surprised if the call did not have central bankers on it as well (updated – central bankers are a part of it according to Reuters)…if not then it is a complete farce – TV commercial to get markets to buy into an appearance of effective policy.
What will be in the presumed statement? Look for a vague promise to coordinate a policy response to the crisis should the need arise and some obvious language on an elevated level of communication pretty much implied by the conference call.
On a more immediate note, the policy ball is in the court of the central bankers…BOC policy meeting today, ECB Wednesday, BOE Thursday, BOJ June 14 and FOMC June 20 (Bernanke testifies in Congress Thursday). I am inclined to think that central bankers return serve to governments on the crisis (Spain bank bailout most immediate policy response) and draw the line on more QE, LTROs and or rate cuts by asserting plenty of easing is in the pipeline, though this will never see the light of day in any explicit language.
Muddling is the default position throughout the EZ crisis and no reason to think pressure from US, Canada and Japan change the dynamics much.
Think ECB meeting Wednesday is setting up for one-way trade for euro; behind door number one is more of same - pass the ball to the governments as the ECB at end of policy rope with loads of accommodation and liquidity in system...worst outcome for euro (most downside), behind door number two hint of readiness to act again on rates and LTROs (sell but not with abandon) and behind door number 3 rate cut and or new 3-yr LTRO and sell with modest downside target in mind (confidence in euro rests in large part on notion ECB officials will act decisively to support the economy, banking system).
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