Forex Trading – The G-20 Impact On Currency Prices
September 24th and 25th, the G-20 nations will be gathering on US soil. Pittsburgh, Pennsylvania will have the honor of hosting 20 of the biggest crybabies in the world.
The G-20’s original mission was noble – to spur international cooperation on economic issues.
Now it’s degraded to a bunch of whiney crybabies. Leaders with the power to affect change, but no political backbone to actually do anything.
In the weeks leading up to G-20 meetings, all we’ll hear is the grandstanding by different countries. It’s become a forum to see who can complain the loudest.
Take China for instance.
Twenty years ago, the country couldn’t afford to feed their citizens. Now they’re angling for a seat at the table as a major player.
How are they doing it?
They start by questioning the strength of US government bonds… They call into question how the US government is handling the economic crisis… They even go so far as calling for the rejection of the US Dollar as the reserve currency.
Heaven forbid that anyone should point out China openly manipulates their currency rates… that’s unacceptable.
But, call for a replacement of the US Dollar as a global reserve currency and you’re applauded.
What a bunch of…
Every time the global summit comes around, China calls for a new global currency. It doesn’t happen at the meetings. It doesn’t happen after the meetings. Nope, they only bring it up in the weeks prior. That’s when the press is actually paying attention.
The entire currency trading community holds their breath. The US Dollar whipsaws about on every little word and rumor.
And once the meeting is over, everything goes back to normal.
The US Dollar has long been the world’s reserve currency. And, let me be crystal clear about this. The US Dollar will continue in that role for years and years to come.
Why?
First off, The US Dollar is used in a majority of the world’s economic transactions. As a matter of fact, most of the global trade in commodities is priced in US Dollars (or in currencies pegged to the US Dollar).
Second, the US Dollar is held by almost every central banking institution in the world. And, it’s regarded as the safest currency around. You can’t just create stability and trust in a currency over night. It needs to be earned.
No replacement currency will be able to do that. Not in just a few short years… something like that takes decades.
Finally, China’s only attacking the US Dollar for political gains. It’s all a show.
The Chinese Central Bank holds more US Dollar currency and more US government bonds than any other entity in the world. If the US Dollar were to be suddenly replaced with some other abstract currency, the value of those holdings would plummet.
It’s like ripping up a Van Gough painting because you don’t like how successful his paintings have become.
So now you know the why… here’s how to profit.
Keep an eye on the currency play you’re considering right now. News of the G-20 summit will push those values around quite a bit. Use it to your advantage.
If you’re establishing a long position in a currency (like the euro, or pound), track them closely. If they suddenly weaken on commentary out of the G-20 meeting, take the opportunity to add to your position at a discount.
The G-20 might be the loudest bunch of crybaby leaders in the world… but there’s nothing that says we can’t profit from them.
Category: Currency Trading
