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G20 Meeting: Fiscal Stimulus Package, Climate Change and Global Tax

Today, a new trading week kicks off after a busy weekend of G20 meetings and a speech by European Central Bank (ECB) President Christine Lagarde. The ECB policymaker said that the organization will continue to offer stimulus to the European economy while financial institutions in other countries have already started to withdraw economic help or are at least considering ways to phase it out.

The weekend brought the G20 group together in Venice, Italy, to discuss global monetary policy, climate change, and the global tax on multinational companies. The first results of the meeting became public from the president of the ECB. Lagarde pointed out that Europe must prepare to receive new guidelines on the fiscal package on 22 July 2021, while the ECB’s economic injection will continue until at least March 2022.

For its part, the Federal Reserve has already begun talks to devise a plan to phase out fiscal stimulus. In Asia, China has already begun the withdrawal of stimulus in its economy.

According to Bloomberg, there is a widespread view among economists that the Bank of England will raise interest rates as early as next year. City of London rental data was up 45% in June 2021 compared to the same period last year, a good sign that the UK economy is gradually recovering from the pandemic.

Climate Change, 15% Global Tax, and the Digital currency

The 15% global tax for multinational companies was another key point at the G20 meeting. This week the Biden administration will send the directive to Congress. The tax would allow the US presidency to raise taxes by more than $2 trillion over a decade.

Climate change was another issue on the G20 agenda. On this topic, President Lagarde urged governments to agree on a unified carbon price. She also hoped that the ECB would buy more green bonds and pointed out that the organization is “not proposing to weigh in any shape or form by reference to climate change” with holdings in sovereign bonds.

Finally, Christine Lagarde discussed the prospects for the euro and the possibility of the creation of a digital currency. The ECB President said that the Governing Council would probably start the “exploratory phase” next week, which would take two years of work before it is launched.

Market Reaction after G20 Meeting

In this morning’s Asian session, markets experienced minor changes due to the G20 developments. The euro also showed minor movement after Lagarde’s statement. WTI (West Texas Intermediate) remained stable at $74.46 a barrel, after posting its first loss in 7 weeks amid tensions between OPEC+ countries.

Gold was down 0.3% at $1802.91 an ounce. The S&P 500 was up 1.1% and the Nasdaq was up 0.7%. Bitcoin hovered around $34,450. Over the weekend, The Wall Street Journal published a report on the cryptocurrency exchange Binance and the multiple million-dollar lawsuits it will have to face in different countries due to the collapse of the platform on 19 May.

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