How Important are G7 Meetings?

Starting today, there is a G7 meeting in Rome. This meeting also includes Russia, along with the World Bank, International Monetary Fund and the World Trade Organization. As you might guess, this meeting is going to focus primarily on the financial crisis and the global recession.

With all of the major world players in one place, there is speculation that coordinated action to avert complete global economic meltdown may be agreed upon. Of course, there are so many opinions on how this should be done that an agreement might be difficult to reach. 

However, there is likely to be some sort of action coming out, especially with regard to the currency market. After all, Russia's currency is in complete meltdown mode, and Japan hasn't been happy with the yen's rapid appreciation. G7 meetings historically affect currencies on the forex market when coordinated action is agreed upon, says GFT's Kathy Lien in FX360:

Coordinated interventions are the most effective types of interventions in the currency market, which is why a cohesive message from G7 nations has such a powerful impact on currencies. All currency traders need to be careful of sharp volatility on Sunday if G7 nations change their statement on currencies. 

Paying attention to coordinated action is a good idea for any financial market. But on a market as volatile as the forex market, changes in the sentiments of world leaders -- especially when they are coordinated -- has an even bigger effect.