How Will the G20 Summit Affect the U.S. Dollar in Currency Trading?

Considering the effects of the G20 summit on the greenback in forex trading

In addition to considering the ECB rate cut this week, forex traders should also consider how the G20 summit is likely to affect the U.S. dollar in currency trading. There are a number of outside factors to consider for the greenback in forex trading as the week comes to a close.

GFT’s Kathy Lien points this out in FX360 about how the G20 summit is likely to affect the U.S. dollar in currency trading:

However the G20 will commit more money for the IMF and will most likely agree to tighter regulation of hedge funds and stricter standards for banks. Since investors do not expect anything groundbreaking from the G20, the risk is only to the upside. This means that if the G20 delivers anything above and beyond more regulations and additional money for the IMF, it would be a pleasant surprise that could be taken positively by the currency and equity markets.

Measures to stabilize the economy are likely to provide a basis for risk appetite, which could change the way the dollar is traded. Another issue will be how the G20 summit combined with ECB decisions will affect the U.S. dollar. With increased economic measures possible, and the idea that the euro zone may not get on board, it could mean a euro sell-off, sending the dollar higher.

Of course, the currency market is always volatile, and things may play out completely differently. If fundamentals become an issue, the euro may have the upper hand in forex trading, since the ECB persists in insisting that inflation may still be an issue, and euro zone leaders haven’t subscribed to near the amount of debt that is being seen in the U.S.