G20 – what TIQL players need to know

The 11th G20 summit is happening on Sept 4th/5th in Hangzhou, Zhejiang, China.

mountain summit

G20 – important but not as cool as this summit

The summit is one of the main forums for international economic cooperation. Countries attending include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United States and the European Union. So it’s clear traders will be watching closely and poring over any press releases sending potential shockwaves through the markets.

The leaders will be discussing many issues such as anaemic global growth, decline in potential for output, increasing volatility in financial markets, weakening global trade and investment, high levels of unemployment and inequalities. But they will all also have domestic agendas to push and their interests are not always aligned.

There’s a potential battle ahead as the US is pushing for a growth plan against the current popularity of austerity in places like the UK. Not sure how sporting it will be…

sword fight

An agreed change of policy by this powerful group of countries could send shockwaves through the markets. Some countries are already leaning in this direction with China itself, a number of EU countries, Canada, South Korea and others taking measures designed to boost their economies instead of focusing on reducing costs. Germany and UK look to be against this move as both still favour an austerity budget though post-Brexit May could be about to relax that stance.

The G20 finance watchdog the Financial Stability Board (FSB) headed by Mark Carney, governor of the Bank of England, has a direct steer on monetary policy throughout the year but it also feeds its advice in to the main summit this weekend so traders will be keeping a close eye on updates from the FSB and Carney.

According to Carney, the main market issue is the perceived effect on liquidity that regulations introduced post-Lehman collapse have had. This told banks to carry more capital to cover potential losses but there seems to be a backtrack happening as Carney says the regulators are committed to ensuring banks don’t have to significantly change the amount of capital they hold. So which is it then? More or not more?

On the plus side, rules already implemented showed their strength in the wake of Brexit when no institutions actually collapsed despite major hysterics. The fear now is that the banks influence will gradually undo the restrictions and allow them to put themselves at risk again.

So whether you are playing FOREX or other indexes, the G20 summit will rev up the markets. So roll up your sleeves, the holidays are over and the markets are back in business. September’s here.

Advertisements