G20 Gives EU Eight Days To Solve Crisis; US Prospones RMB Pressure

By David Liu,

Weekend Headlines
  • G20 ministers give EU officials eight days to fix crisis
  • French and German plans urge bank recapitalization, EFSF impact maximization, contagion prevention
  • US-China RMB talks continue, takes a backseat to Europe; House delays vote

Risk currencies opened with a moderate gap lower after the G20 summit, suggesting that markets remain skeptical to any new European developments. As Greece has yet to receive its next tranche, Troika officials continue to review the scale of its proposed budget cuts, which are still under the proposed amount. The most likely proposal currently remains using the EFSF to maximize its benefit by continued purchase of peripheral debt, while continuing to recapitalize and back up banks holding the largest amounts of Greek, Portuguese and Italian debt.

New rhetoric from this weekend focused mainly on preventing contagion from spreading to other European countries in case of a Greek default or forced haircut of its lenders. Bank of France Governor Christian Noyer also noted that EFSF funds are sufficient for Greece, Ireland and Portugal, before adding he “excludes possibility of default by Italy and Spain.”

Although there was no large change in the ongoing discussion between the US and China on the value of the yuan, talks between the two nations were relatively muted during the meeting. The US House of Representatives have delayed voting on the Chinese Trade Bill passed last week by the senate, with Speaker John Boehner pointing to the proposed legislation as a “very severe risk” to the global economy at this time.

EURUSD 5 minute chart. Generated with FXCM Strategy Trader.
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Original Article: http://www.dailyfx.com/forex/market_alert/2011/10/16/G20_Gives_EU_Eight_Days_to_Solve_Crisis.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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