November’s Seoul G20 has been on the radar for ages but the market has only recently got seriously fixated by this weekend’s Washington IMF meeting.
It seems unlikely that any meaningful action on currencies will be agreed this weekend. On Tuesday Simon Derrick at BNY played down the possibility of any result from Seoul too: “It seems likely that calls for some kind of currency accord will rise in volume in the days ahead (the latest came from the Institute of International Finance overnight). However, with the US and China (and arguably Europe and Japan) holding to almost exactly the same positions they had in the run up to the November 2004 G20 meeting in Berlin, it seems reasonable to suppose that the outcome will be the same as six years ago (i.e. none whatsoever).”
But on Thursday either the market got seriously spooked or someone applied a vice to shorts (I’m looking at you, Brevan Howard). In any case, those option players who were predicting a benign result from Washington suffered a lot of pain as G10 1-month and shorter got ramped. EUR/USD saw the most action, of course, with 1-month trading close to 15% at the highs, a full 2 vols higher than a couple of days earlier.