Home G7 Optimism – Bad for the Dollar

G7 Optimism – Bad for the Dollar

G7 Finance ministers expressed optimism in their meetings this weekend. This optimism ignites risk aversion which isn’t good for the US dollar, and might send other currencies higher against it.

Finance ministers of the Group Of Seven met this weekend in Washington DC to discuss the state of the global financial crisis. These finance ministers, with Timothy Geithner as the main speaker, expressed optimism. They see the bottom behind them, despite being cautious:

“Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilization are emerging,” the G7 said in a closing communique.

This renewed optimism from these senior figures might draw traders to risk. Risk appetite releases money from “safe haven” currencies to higher yielding currencies. Risk isn’t averted, but rather looked for.  

The US dollar has been the safe haven / risk aversion currency in the recent crisis. The absurd is that the US pulled down the world into recession, but when trouble is smelled, dollars are bought.

Last week’s good Durable Goods Orders weakened the dollar and pushed other currencies higher. For example, the Euro enjoyed a very good Friday. Also the Pound was ok, despite a very bad GDP figure for the first quarter.

With the G7 optimism, the dollar could start the forex trading week lower, even with weekend gaps. News from the G7 meetings is also stronger due to a very light economic calendar on Monday.  

Check out the Forex Weekly Outlook for a review of this week’s major events.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.