Measured Euro correction - 13-03-09

Finance Ministers and central bank officials from the G20 countries will meet this weekend in an attempt to form common policy objectives ahead of the main summit which is due at the beginning of April.

Two policy areas will be very important with officials likely to make progress on plans for more effective reform for the global banking sector.

The UK is also likely to push for a further concerted fiscal stimulus in an attempt to help strengthen the global economy. There is, however, evidence that the German and French officials will oppose the suggestions and this is liable to create friction. The disagreements should be contained at this stage and the risks of a slanging match look low which should avoid any serious market destabilisation.

In this environment, risk appetite is liable to be slightly weaker at the beginning of next week.

Following the Swiss National Bank decision to intervene and weaken the Swiss currency, there will be additional pressure for more dynamic ECB action to help underpin the economy and there will also be increased speculation that the bank will move towards a policy of quantitative easing and this will limit Euro selling pressure.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001