SCOREBOARD: G20 double-talk

Gold fell $18 overnight to $1648 and there's plenty of talk afoot that the drop may have something to do with the Group of 20 meeting this week. Talk is that the G20 will reaffirm its commitment to market-determined exchange rates and that this will cool the currency wars.

I don't doubt that the G20 will indeed reaffirm its commitment to market-determined exchange rates, but that's the great joke, and the way of international diplomacy – deception. Just because they all sing the same song together, doesn't mean the currency wars are diminished in any way. Remember it was only a couple of years ago (2011) that the US Treasury Secretary was talking about the value of a strong dollar while the US was debasing its currency. Japan, having just printed however many zillions of yen to cheapen its currency, turned around literally a couple of weeks later to admonish the Chinese for manipulating theirs.

So the game goes on, each embracing the wonders of floating exchange rates while in practice manipulating their currency.

Precious metals are having a tough run at the moment though, with silver down 1.4 per cent last night. From their peaks late last year, silver is down 11 per cent or so and gold down some 8 per cent. I suspect this has more to do with suggestions QE may soon be pulled in, given the solid run of dataflow, rather than the G20.

On that note, the vice chair of the Federal Reserve, Janet Yellen – whom I firmly believe would be happy printing money for the next millennium – said that the economic targets the Fed stated they would need to see to raise rates (unemployment below 6.5 per cent and CPI 2.5 per cent) were not triggers, and that the Fed was under no obligation to raise rates if they were reached. There you have it, people, straight from the horse's mouth and a massive contradiction. The Fed maintains that it has to keep massively stimulatory policy in place because of the high unemployment rate. Now we hear that even if the unemployment rate comes down sharply, heck – they may just keep massively stimulatory policy anyway! Yep, the G20 statement matters not a bit.

As for Wall Street, US equities are down about 0.1 to 0.2 per cent with about an hour left to trade (with the S&P500 at 1516, Dow at 13,963, and Nasdaq at 3188). Energy stocks were key underperformers, despite crude rising 1.3 per cent overnight to $96.91. Financials, in contrast, outperformed. There wasn't really much news out to guide things and price action reflected that – it was a similar case in Europe too, with the major indexes hovering around 0 (the Dax down 0.2 per cent, the CaC up 0.03 per cent and the FTSE100 up 0.2 per cent).

For price action elsewhere, the Australian dollar is off another 50 pips or so to 1.0285, while the euro is 15 pips or so higher at 1.3390, but got up to 1.342 after the Bundesbank head said that the euro wasn't overvalued. The big move was on the British pound, which fell 130 pips to 1.5664 (the Bank of England is expected to lower its growth forecast as a prelude to printing more money), while the Japanese yet shot up (yen weakened) from 92.62 to 93.45. US Treasuries then traded on a few basis points and ended little changed with the 10-year at 1.949 per cent, the 5-year at 0.837 per cent and the 2-year at 0.257 per cent. Aussie futures followed suit and were largely unchanged, with the 3s at 97.23 and the 10s at 95.575.

Looking at the day ahead, we get NAB's business survey today at 1130 AEDT. Now, for the December quarter we know that confidence was the lowest since the GFC, notwithstanding a rebound in the actual month of December. Ideally we will see another lift in January given the vast improvement in global prospects, but you can never be sure. That's the key release today, while tonight we see minor US data in the way of the NFIB small business optimism index, monthly budget data and job openings. Fourth quarter delinquency and foreclosure data will be of interest and there will be of a bit of Fed speak on the US economy from Kansas City Fed president Esther George.

UK inflation figures are also out but this is no longer a market sensitive release given the Bank of England has effectively dropped its inflation target and the new governor Mark Carney (effectively the UK Treasury's yes man) promises to pay even less attention to it. Surely they could save the UK taxpayer some money by appointing a minimum wage teenager to the job? The end result will be the same.

Enjoy…

Adam Carr is a leading market economist.

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