IMF’s Lagarde, other G20 finance VIPs urge action on reforms

Between the end of the G20 meeting in Shanghai to next week’s China, U.K. and Australian PMI reports along with the Reserve Bank of Australia monetary policy meeting, non-farm payrolls and a number of other market moving releases, there’s no shortage of event risks capable of triggering big moves in currencies.

“Talking about further stimulus just distracts from the real tasks at hand”, Germany’s Minister of Finance Wolfgang Schaeuble said on Friday, rebuffing a recommendation from the International Monetary Fund (IMF) that the G20 should start planning now for a coordinated stimulus programme.

With the recent market turbulence front and center, the G20 is under pressure to agree a coordinated stimulus program that could stop a global slowdown from turning into something worse.

The People’s Bank of China (PBOC) on Tuesday set yuan midpoint at 6.53 per dollar, representing 0.17% decline from previous day. He also stressed that China will not “overly” base its macroeconomic polices on exterior economic performance or capital flows.

Asian shares were mostly up after China’s central bank governor pledged not to devalue the yuan for the sake of export competitiveness. “The Chinese economy will continue to grow at a moderate-to-high pace”. The summit is expected to have a major impact on China (FXI) and the other major emerging markets (EEM).

China’s exports have been shrinking over last one year, slowing down export-oriented manufacturing sector, which is a traditional growth driver in the economy.

“(There’s a) need to avoid competitive devaluation, that’s competing in a beggar-thy-neighbour way for sharing a pie that’s either frozen or shrinking and it doesn’t lead anywhere good”, he told reporters.

“Monetary policy is extremely accommodating to the point that it may even be counterproductive in terms of negative side effects”, he said.

Japan’s finance minister, Taro Aso, and European Union officials have expressed hope for “policy coordination” to reassure global markets.

Geopolitics is also a worry for European representatives.

Policymakers are watching closely for signs that China is ready to tackle the imbalances they see standing in the way of its economic sustainability.

Mr. Xiaochuan also said: “There is no basis for persistent [yuan] depreciation from the perspective of economic fundamentals”.

“The signal from interest rates will be clearer…so we are gradually developing an interest rate corridor”, he said.

“We are relying more on a median value of interest rates generated by the central bank’s open market operations”.

Spanish Economy Minister Luis de Guindos, left, joins Mexican Deputy Finance Minister Fernando Aportela, second left, and Indian official Dinesh Sharma, right, in a panel for a session of the G20 High-level Seminar on Structural Reform, on the sidelines of the G20 Finance Ministers and Central Bank Governors Meeting at the Pudong Shangri-la Hotel in Shanghai, China, Friday, Feb. 26, 2016.

China’s strict exchange control regime, allowing only the daily fluctuations in exchange rates under 2%.

This echoes calls from the OECD earlier this month for its members for a “stronger collective policy response”, that moves away from austerity towards a more balanced, pro-growth strategy. “China is ramping up public relations in what will be a hard 2016”, China economist at IHS Global Insight, Brian Jackson, said in a research note.

Earlier this week, the International Monetary Fund said the global economy had weakened further and that it was now “highly vulnerable to adverse shocks”.