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More Decisive Moves Needed From Central Banks As G7 Meet In London - Trader

posted 10 May 2013, 04:11 by Mpelembe   [ updated 10 May 2013, 04:12 ]

G7 finance chiefs gather in London, but is there anything left to say? Investors will be watching for a more decisive move from the European Central Bank and the Bank of England as the austerity-growth debate rolls on, says ETX Capital's Joe Rundle.


"(QUESTION: The G7, they met about three weeks ago in Washington. What's changed since then?) 

To be honest, not a lot. I mean we've seen the European Central Bank make a move. But really, it's just the same old meeting probably discussing the same thing and they're not really going to do any action and that's the thing we've seen for the last year. 

(QUESTION: And is George Osborne going to cut a solitary figure because we're going to be talking about austerity against growth and he's the only one sticking to austerity?) 

Yeah he is. Osborne's at a very difficult situation. He's made a real political stance about austerity and says that it is the way forward. I do think he might find a better backing from the Germans who are actually benefitting massively from the Eurozone crisis and they are in no real hurry to get the Eurozone recovering very quickly.

 (QUESTION: But what about the role of the central banks? The politicians seemed to want more from the central bankers. Do they have much more ammunition left?)

 Well not really. They've cut interest rates as much as they can go. I think the US, the Fed have been incredibly proactive and I think the ECB must take a leaf out of their book. They actually really need to do something other than a token interest rate cut. And I think there could be calls for more QE from the Bank of England

(QUESTION: Slightly away from that, the Yen's gone through 100 against the Dollar today and I suppose that was inevitable given what the Bank of Japan has been doing. But how do you trade that?)

 Well I think it's obviously trying to get involved at these levels. I think we might see a little move up to 101.50, which was back in April '09, the high then and probably a pullback, then I would be a buyer of any dips at the moment. 

(QUESTION: And finally then, a more domestic story, the Cooperative Bank, the CEO has resigned this morning after a Moody's downgrade and they're looking very seriously at the capital requirements. How much of a shock does this mean for the market? And also, does this mean the end of what we thought was the end of the troubles for the UK banks?)

 Well I think the smaller banks in the UK are in a very difficult capital position. The regulations that are being predominantly a banking environment is very, very tough to make money. So I think they will have to raise some capital. I think the CEO stepping down today is not a helpful move and will maybe give a little bit of panic into the system that could actually self-fulfill the need for capital and external support."