G8 Summit to Steal Spotlight Ahead of FOMC; 'Abenomics' in Focus
The UK is hosting the annual G8 Summit today and tomorrow, where leaders from some of the world’s largest economies will gather to discuss pressing issues provoking the recent global slowdown. While there is a great focus among G8 members concerning the recent strife in Turkey and Syria, much attention will still be paid to the volatility that’s befallen developed financial markets in recent weeks. The US and Japan are summit attendees and central bank policy in both of these countries will likely be a point of discussion; the EU sends representatives as well.
UK PM David Cameron, who is leading the G8 Summit this year, has centered this year’s agenda on tax, transparency, and trade. The US and EU have begun formalized free trade talks, which PM Cameron believes could be worth £10 billion for the UK economy. Cameron has also met with Japanese PM Shinzo Abe so far at the meetings, and the two discussed the three arrows of “Abenomics,” although no specific details of the meeting have been published at the time of writing.
Today’s meeting will likely revolve around tax avoidance, which PM Cameron seems eager to resolve. Multinational firms such as Apple are the target of these talks. Human rights issues will also likely dominate the first day of talks.
The economically relevant discussions will mostly occur tomorrow and investors should take note what G8 leaders say ahead of the US FOMC meeting on Wednesday. The IMF recently warned the US against tapering QE too early, which would cause increased market volatility. Fed Chairman Bernanke is not present at the meetings but will likely take note of what G8 leaders will say ahead of Wednesday’s meeting.
Rhetoric towards Japanese PM Abe should also be watched. Earlier this year, investors were concerned that currency manipulation accusations would cause problems in executing “Abenomics.” However, the focus is now likely to be on financial market instability, especially in the Nikkei and JGB markets. It remains to be seen how accommodative other G8 members will be to help spur Japan out of a multi-decade long recession.
--- Written by Kevin Jin, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.