Reactions to G20 Muted

The G-20 meeting over the weekend triggered little reactions in the markets today. The main topic of the G-20 summit was on resolving the sovereign debt crisis in the Eurozone. Whilst the countries pledged that would review options to ensure that the IMF has sufficient funding to supply in a timely matter, countries outside the Eurozone requested that the 17-nation region to take further steps to strengthen its own firewall before reviewing these options further at the next G-20 meeting in April. UK Finance Minister, George Osborne, stated that, 'We have to see the color of the eurozone's money first - and, quite frankly, that hasn't happened. Until it does, there's no question of extra IMF money from Britain or probably anyone else'. Yet, Germany’s Chancellor Angela Merkel argued that there is already enough money pledged and the Germany policymakers would decide in March on whether it would contribute more to the EFSF.

IMF managing director Lagarde warned that the world economy is "still not out of the danger zone." She urged G20 countries to "strengthen resilience to further shocks that could result from the still-fragile financial systems, high public and private debt, and higher world prices". She said that and increase of USD 500b in IMF's lending capacity was suggested, and that would be "combined with an equally credible, high-quality and properly-sized firewall at the European level." On technical level, there was also agreement that such increase in IMF recourse could be down through "bilateral borrowing and note purchase agreements."

The calendar today is light. In New Zealand, the trade report surprisingly recorded a deficit of NZD 199M in January, following a downwardly revised 306M surplus in the prior month. Looking ahead, Eurozone M3 money supply is expected to rise 1.8% yoy in January. In the US, pending home sales probably gained 1.00% m/m in January, up from a -3.5% contraction a month ago.