[ForexNews]

The G20 meeting did not produce any concrete policy initiatives, with the main takeaway being the commitment to continued policy stimulus. While there was a discussion of exit strategies in the communiqué, there was an emphasis that these strategies will be applied at the appropriate time and that this time was still some way off. This will weigh down the "QE" currencies - USD, EUR and JPY - and give the commodity currencies further support.

The White House text on the G20 outcome did not mention the dollar, but rather focused on the launch of a "Framework for Strong, Sustainable and Balanced Growth". Under this the IMF is to undertake analysis of countries' adjustment policies, though the "peer group" review will act only through moral suasion. The G20 also agreed that countries must continue to stimulate the economy "until recovery clearly has taken hold", but must also "develop a transparent and credible process for withdrawing our extraordinary....support". However, it stopped short of providing a detailed exit strategy.

As well the G20 called for "strong international standards for bank capital", "strong international standards for compensation aimed at ending practices that lead to excessive risk-taking", steps to make OTC derivatives markets more transparent, and procedures for managing the failure of large global financial firms. However, the full details on financial sector compensation and bank capital requirements still need to be resolved: there was no agreement on pay limits while the G20 did not endorse a US proposal that large banks hold more capital than small ones. The G20 also committed to phase out fossil fuel subsidies over the medium term and agreed to a shift of "at least 5%" in IMF quota shares from over-represented to under-represented countries.

Perhaps the strongest dollar endorsement came from ECB President Trichet, who in an interview with Il Corriere della Sera commented that "a strong US dollar is crucial for the US economy itself and for global economy's stability as well". Elsewhere, Mr Trichet seems to have stuck to the standard Eurosystem line in arguing that strengthening public accounts positions should start, at the latest, when the economy's recovery starts, and that those efforts should be increased in 2011. When asked about a "double-dip" shape for euro area economy he says that the situation is very uncertain, and he reiterates the message that euro area could see a bumpy recovery road with positive and negative quarterly GDP figures.