From ING Think, May 23:
FX markets are settling into calmer conditions ahead of the long weekend in the US and the UK. While G7 finance officials reaffirmed their commitment to free-floating exchange rates at this week's meeting, they did share their concern over 'unsustainable macro imbalances'—perhaps a nod to US concerns over its trade deficit. The calendar is light today
USD: No change in FX language at the G7 meeting
Earlier this week, we speculated over the low probability, high impact event of a change in FX language in this week's closing statement from the G7 meeting of Finance Ministers and Central Bank governors in Canada. In the end, the statement said very little about FX apart frrom reaffirming commitment to its 2017 statement on FX - namely favouring free floating exchange rates and avoiding competitive devaluations, However, the statement did seem to convey much of the US concern over unfair trade practices which resulted in concern over 'unsustainable macro imbalances'. We read that phrase as the G7 looking at China's large trade surplus, although the global investor base could equally be looking at the US trade and budget deficits, too.
So, if the US Treasury avoided the blunt instrument of a G7 statement change to weaken the dollar, where does that leave us?....
....MUCH MORE
