Big news is the FT article explaining that China and the US have talked outside the recent G20 meetings re: FX wars/trade imbalances. It appears that both countries may be trying to restore trade imbalances. If that is the case we are going to see the market tipped upside down. China will try and manage it's slow down (which will be interesting to say the least), but increase Yuan strength, thus shutting down aspects of it's export powerhouse, we may see US Dollar strength pick up significantly as the US will then try and build up it's export markets.
Sounds nice, market is starting to digest the possibilities, this could feed into a sudden correction in stocks, currencies into the tail end of 2010.
All and all it also means that the next round of qualitative easing by the Federal Reserve may not be has dramatic in early November 2010.
Still think protectionism will be the cream on the top.
from FT 27/09/2010
"China and the US have the basis for an agreement at the summit of the Group of 20 leading nations next month on setting targets to cut trade imbalances, according to an adviser to the Chinese central bank.
Li Daokui, a member of the central bank’s monetary policy committee and professor at Tsinghua University, said on Tuesday there had been “good progress” at the weekend meeting of G20 finance ministers in South Korea which had moved debate from the “surface issue” of nominal exchange rates to “talking about the substance of rebalancing world trade”.
“China should not be afraid of numerical targets for reducing its trade surplus,” said Mr Li in an interview. “China is well positioned politically and economically to make this adjustment.”
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