Christine Lagarde, MD of the International Monetary Fund is visiting Japan, said European leaders “have to implement, implement, implement” necessary reforms to reassure financial markets although it takes time. She also told a press conference that the Japanese yen has remained “moderately overvalued.”
The comments came despite the agreement last week by European Union leaders to have the eurozone bailout funds directly inject aid into struggling banks and intervene in bond markets to help lower borrowing costs for some member countries.
“Momentum has been somewhat building among relevant countries to make a stronger push” for creating a road map, Japanese Finance Minister Azumi said, but he added, “It is not that the countries have made significant progress.”
As the euro has resumed falling while borrowing costs remain at unsustainable high levels for such countries as Spain and Italy, despite the EU summit result, Lagarde admitted, “It might not be absolute satisfaction to markets.”
But she also said, “Clearly the Europeans have decided to move ahead to the banking union. They have to implement, implement, implement, and “adding,” The next stage, in our view, will be the fiscal union, which has also supplement the monetary and banking union.”
As for overall global economic outlook, Lagarde indicated the IMF will soon revise downward its growth estimates made in April, though she did not mention any specific numbers.
The IMF acknowledged in June that market interventions can generally be a policy tool to avoid disorderly movements in foreign exchange rates, fueling speculation that Tokyo could continue its operations to ease the negative impact on the earnings of Japanese exporters, despite criticism from the United States and Europe.
Global share markets were down on the poor jobs data released in the US on Friday, with commodities tumbling
EURUSD (1.2286) The euro continues to fall against the USD and its trading partners. There seems to be no bottom to the fall. Starting with pessimistic statement on the EU economy from the ECB, followed by an IMF growth revision and pessimistic comments from IMF director Lagarde compounded by a poor jobs report in the US, which means a possibility of Fed stimulus the euro has had the bottom pulled out.
The Great British Pound
GBPUSD (1.5488) With overall negative sentiment to anything associated with Europe and adding in the negative PPI eco data in the UK on Friday, there is little to support the pound, as the USD gains momentum.
Asian –Pacific Currency
USDJPY (79.67) The yen dollar battle is curious, with the USD strong and the Yen weakened on poor eco data, but the possibility of BoJ action and the market move to safety again, keeps the yen strong against the USD.
Gold (1583.85) as worries over global growth, gold has fallen out of favor as the safe haven, as investors are moving back to the USD and the JPY. Gold continues to lose its shine falling 25.55 on Friday.
Crude Oil (84.06) with growth revisions downwards by the IMF, poor jobs data in the US and poor eco data in the EU the demand for oil continues to decline. After a boost by Iranian rhetoric, the markets have turned to ignore Iran and pay attention to fundamentals such as growth and demand, supply and production.