The financial world is changing and that was very evident over the weekend when China and India gained some foothold within the IMF at the expense of the developed economies. Obviously this came about because of some serious behind-doors bargaining and some of the concessions which might have been made include:
- Asian countries agreeing to reduce their FX market intervention
- The US agreeing to downscale any further QE
If this was the case then it will have some impact on the major pairings. Less intervention in USD/Asia means less need for diversification of USD into EUR, AUD etc. Less intervention in USD/Asia will of course mean that Asian currencies appreciate which should benefit the AUD overall. Less QE will improve market sentiment for the USD.
Therefore for the next 3 weeks ahead of the G20 summit if you agree with the above, then you would expect USD/Asia to fall, EUR/USD to fall, USD/JPY to remain steady and the AUD/USD also to hold reasonably steady (though this latter pair depends alot on existing positioning in the market).
