29 Feb 2016
G20: Few surprises - TDS
Research Team at TDS, suggests that the communique from the G20 Finance Ministers and Central Bank Governors meeting in Shanghai contained few surprises.
Key Quotes
“Policymakers attempted to ease concerns over global growth prospects and noted that recent financial market volatility "has not reflected the underlying fundamentals of the global economy", but also acknowledged that downside "risks and vulnerabilities" had risen. To combat these, however, the G20 took a step back from emphasizing monetary policy efforts in favour of "fiscal policy flexibility" and structural reforms. We downplay these statements, however, and do not expect any durable policy shifts.
On FX, officials stated they would "consult closely on exchange markets." While this represents an incremental upgrade to their concerns over recent currency market developments and a return to language introduced shortly after the JPY interventions in 2011, we think policymakers remain far away from anything that resembles coordinated action to counter recent trends and rather we are likely to continue to see ad hoc attempts at bilaterally managing currencies.
In terms of market reaction, this weekend's outcome may disappoint those who had hoped for a clearer statement of intent, but we think any risk-off response is likely to remain limited. Global equities may remain under pressure while the JPY may regain support in early trading this week.”
Key Quotes
“Policymakers attempted to ease concerns over global growth prospects and noted that recent financial market volatility "has not reflected the underlying fundamentals of the global economy", but also acknowledged that downside "risks and vulnerabilities" had risen. To combat these, however, the G20 took a step back from emphasizing monetary policy efforts in favour of "fiscal policy flexibility" and structural reforms. We downplay these statements, however, and do not expect any durable policy shifts.
On FX, officials stated they would "consult closely on exchange markets." While this represents an incremental upgrade to their concerns over recent currency market developments and a return to language introduced shortly after the JPY interventions in 2011, we think policymakers remain far away from anything that resembles coordinated action to counter recent trends and rather we are likely to continue to see ad hoc attempts at bilaterally managing currencies.
In terms of market reaction, this weekend's outcome may disappoint those who had hoped for a clearer statement of intent, but we think any risk-off response is likely to remain limited. Global equities may remain under pressure while the JPY may regain support in early trading this week.”