The G8 conference in Northern Ireland continues today, following last night’s delegate statements that the worst of the world’s economic problems are behind us. As Mario Draghi has already made this claim about the EU a couple of times this year, it is no surprise that the G8 have reported such a positive state of affairs. As confidence is arguably the most important catalyst when it comes to driving events, there is a little of the ‘horse before the cart’ here – however, needs must.
Interestingly all parties have agreed that promotion of growth is needed and, following on from the ECB’s interest rate cut earlier in the year, currency traders have been waiting to see what stimulus the EU will introduce. The lack of action in this department is beginning to become worrying. The ability to talk about change has always been one of the strong points of the EU – actually implementing it has been something they have found considerably more difficult to master.
So far today the EUR/USD has gained 50 pips, but ultimately is unlikely to move too far away from this region ahead of tomorrow’s comments from Federal Reserve chairman Ben Bernanke. Our clients remain broadly short of this currency cross, with 75% currently positioned this way.