One of the biggest macro events we’re watching right now is a meeting of G20 finance ministers taking place in Mexico City starting today and continuing into the weekend.
It seems likely the meeting will focus on how to deal with the fallout from an upcoming Greek default—selective or not—but there are few more points we’ll be watching closely:
- The IMF’s willingness to bail out Europe: The U.S. in particular has proved resistant to increasing the size of funding available to support the eurozone in its crisis, and given Treasury Secretary Timothy Geithner’s comments on CNBC this morning that sentiment is likely to persist. Even so, we could see more leaders fearful and hence flexible as Greece prepares to go through the first developed economy default in 60 years. PIMCO chief executive Mohammed El-Erian argued this morning that the G20 must forcefully resist this pressure.
- A focus on global growth: Deleveraging remains a big worry for the G20, particularly amid rising concerns about the sustainability of global growth. Finance ministers will likely explore more ways to foster sustainable economic expansion, but any groundbreaking formal initiative would likely come as a surprise.
This summary from Morgan Stanley’s Currency research team adds a little colour to that last point:
The G20 meeting this weekend could put the focus back on global growth, and hence the next round of PMIs over the coming week will be of increased importance. The early “flash” releases of the Chinese and European PMIs revealed some areas of weakness. The sharp decline in the Chinese export component and the surprising weakness in the German surveys is not an encouraging sign for demand in developed markets, in our view. Any signs that the recent stabilisation in PMIs is just a pause will leave the high-beta currencies vulnerable once again.
The next summit of G20 leaders is scheduled for June 18-19 in Los Cabos, Mexico.