The G7 communique has been released (here) and I have used our new favourite toy to see what they are highlighting. As you can see its about fiscal positions, financial recovery, growth and support.
I personally think it was a bit wet in the sense that it was mostly motherhood statements but they did back Obama’s plan from yesterday which is interesting.
Equally they say that central banks stand ready to support the banking system which after last night’s moves, including stories that Germany is getting ready to backstop its banks if Greece defaults and the rumours in the market that could be as soon as this weekend:
Monetary policies will maintain price stability and continue to support economic recovery. Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets. In this context we reaffirm our commitment to implement fully Basel III.
Importantly, they have had a pop at the Swiss National Bank when they said that:
We reaffirmed our shared interest in a strong and stable international financial system, and our support for market-determined exchange rates. Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will consult closely in regard to actions in exchange markets and will cooperate as appropriate.
But you can also see a veiled threat to speculators that they will intervene if required. I’m guessing that this is the best that the Japanese could get. Two things it tells me Japan will be ready to hit USD/JPY if it falls too far and the US is implicitly agreeing that they don’t want the dollar any lower than it got.