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Monday, November 08, 2010

Outlook - Stormy G20 Predicted

The atmosphere at the forthcoming G20 summit in Seoul later this week is likely to be somewhat heated, following on from pre summit soundbites issued by the Chinese and then Barack Obama over the recent move by the US Federal reserve to print $600BN (Quantitative Easing 2).

China, and some other countries, are not happy that this tactic pushes the Dollar lower, thus making their exports to the US more expensive and the lessening the value of their Dollar based investments.

Barack Obama responded, during a press conference in India, by saying that QE2 would bring about higher US growth rates which would be "good for the world as a whole". The US is also of the view that the Chinese Yuan is undervalued, and are pressing the Chinese to let it float higher.

The G20 will see an intensification of this "spat", as various countries begin to draw battle lines over possible future "currency wars".

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