Another G-meeting and the market is again left wanting more. The market had to find trade scope from what the G-20 left out rather than what was included. There had been speculation that the strength of the EUR vs the Yen would draw comment but officials failed to react.
It has been a feature of these meetings that officials steer clear of criticizing other countries policies and currency positions, possibly for fear of drawing flack themselves. More calls for forex flexibility but nothing tangible for the market to draw firm conclusion from. While the carry trade ticking bomb was left alone the interest rate issue was a factor. ECB's Trichet said the bank would be strongly vigilant on inflation risks. The lack of Yen concern and hawkish ECB stance gave the EUR room to climb to new record highs vs the Yen and this gave EUR/USD a push to 1.2854. Price action is tight and the session slow to get going.
EUR/USD is well balanced with little advantage shown. On balance the EUR should have the edge but failure to drive home the G-20 advantage will see EUR/USD drop from the mid-1.28's. Price is looking like 1.2810 to 1.2850 ahead of the US open.
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