The foreign exchange (FX) market is wary about the meeting happening this weekend, said Alex Edwards, senior corporate dealer at online currency exchange provider UKForex. He believes the strength of the euro against the US dollar will be a major topic on the agenda.

He added, ‘We are likely to see some squaring up of positions in the run-up to this meeting. If some European officials get their way, we could see attempts to temper the weakness in the US dollar and strength of the euro, and GBP/USD will come back closer, if not break below the 2.0000 figure.

‘If comfort with the ongoing weak US dollar is expressed, signs do not look good for the greenback, and fresh highs may be taken out come Monday morning. A break of 2.0500 in GBP/USD will be key and will likely trigger further buying of sterling.’

Another issue likely to be discussed at the meeting is the weak Japanese yen and the resulting demand for the carry trade, Edwards predicted.

The G7 meeting will see finance chiefs from the world’s leading industrial nations meet to discuss current financial and economic issues. The seven countries represented are the UK, the USA, Japan, Italy, Germany, France and Canada.

For more on FX trading see the November 2007 issue of What Investment, on sale Saturday 26 October 2007.