G7 Most Probably Won’t Intervene In Forex Markets

One of the most significant events concerning the forex markets this week will be the G7 meeting this weekend as G7 officials will inevitably discuss foreign exchange and economic issues. So far, it seems that European officials aren’t likely to make a strong issue about the Euro exchange rate. The weekly magazine Der Spiegel reported Saturday that the German finance ministry is against the use of intervention to support the weakening US dollar, citing a finance ministry document prepared for Finance Minister Peer Steinbrueck. According to the report, interventions to prop up the greenback “can hardly be financed” in the volumes that would be necessary. Also, a rate cut by the European Central Bank to bring interest rates in the Eurozone closer to levels in the US and therefore make investments in the Eurozone less attractive are “extremely unlikely” in the current high inflation environment in the Eurozone. My opinion is that European officials are much more concerned about the inflation situation in Europe compared to the rising Euro as the latter helps in some way to combat the rising prices of commodities, and even though they may not like a strengthening Euro, they may need it as a necessary evil. ECB Vice-President Lucas Papademos said Saturday European officials won’t be altering their message on forex rates at the upcoming G7 meeting.

Forex Trading

In Monday’s trading, the US dollar is slightly higher against the Euro, British pound, Swiss franc and Japanese yen even in the light of weak US payrolls numbers last Friday. However, firmer-than-forecast German industrial production figures for February ( 0.4% m/m and 6.1% y/y) helped EUR/USD to move back above 1.5700. Its nearest resistance is around 1.5780-1.5800. With ECB rate decision looming on Thursday, traders are reluctant to bid the Euro much higher. USD/CAD is higher today, reaching an intraday high around 1.0115 on news that Canadian building permit issuance declined by 1% in February vs an expected 0.8% increase.

Tuesday:

Australia NAB business confidence 0130 GMT

Bank of Japan rate decision (rate expected to stay at 0.5%)

Japan EcoWatchers survey 0500 GMT

Canada housing starts 1215 GMT

US pending home sales 1400 GMT

US FOMC minutes 1800 GMT

UK Nationwide consumer confidence 2301 GMT

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