Are you looking for information on the G7 currencies?
Well, if you’re a Forex trader, knowing the currencies that are part of the G7 is important. This guide covers all 7 currencies, the history of the G7, their size, and why they are important.
What Are The G7 Currencies?
The G7 currencies are the currencies of some of the world’s most developed and sizable economies. These currencies consist of those used by Italy, Germany, Japan, France, Canada, the United States, and the United Kingdom.
The current types of currency include the Canadian Dollar, the U.S. Dollar, Japanese Yen, Pound Sterling, and euro. Germany, Italy, and many other nations share the same currency since they are part of the Eurozone.
The combination of these G7 countries represents 40 percent of global gross domestic product (GDP)– the combined monetary or market value of all of the services and finished goods provided or produced within a country’s borders within a specific period.
The G7, or group of seven, was initially formed in 1975 and composed of only six countries.
The organization was founded to respond to the economic state in the 1970s, including the energy crisis and the foreign exchange collapse, to serve as a platform for coordinating macroeconomic initiatives. In the following year, Canada received an invitation to join the group.
Even though the G7 is composed of some of the most formidable economies globally, it still excludes China since it is considered a developing country (even though it has the third-largest economy).
These same seven countries were also members of another organization known as the G8, whose additional member was Russia.
Russia joined as a member of the G7 in 1997, which bumped the organization to G8. However, in 2013, the group shrunk to G7 once more. This was due to Russia’s invasion of Crimea.
Following the invasion, the other G8 members imposed sanctions against Russia, thus excluding Russia from the organization once more.
Used solely in Canada, the Canadian Dollar comes in at a rank of tenth in the world. The strength comes from its exports, including minerals, grains, wood products, and petroleum.
The Canadian Dollar also undergoes relatively consistent growth, further lending to the strength of the currency.
The U.S. dollar is ranked ninth globally but is considered the world’s most vital reserve currency due to its use in about 87 percent of all foreign exchange.
This essentially means that the staggering majority of foreign exchange consists of currencies traded from or to the USD.
The U.S. dollar is considered the benchmark currency for the global market. This means that as the value of the dollar increases, the cost of commodities in dollars rises but lowers in foreign currencies.
This translates to cheaper commodities when the dollar value plummets but expensive commodities when the dollar value skyrockets.
Sixteen countries have implemented the U.S. dollar as their official currency. According to the IMF, the total broad money in the USA came in at $23,302.05 trillion at the end of 2020.
Japanese Yen is the official currency solely in Japan but is widely renowned and popular within international trading because of the extremely low interest rates that boost the yen’s value.
According to the IMF, the total broad money at the end of 2020 amounted to JPY 1,516,800.00 trillion.
The pound sterling, also known as the British pound, ranks fifth in the world. It is supported and strengthened by Britain’s valuable exports, including minerals, machinery, precious metals, cars, and pharmaceuticals.
The pound sterling is also further supported by a lower inflation rate, which lends well to the exchange of the currency.
The pound sterling is the official currency in several places, including Great Britain, the British Antarctic Territory, the South Sandwich Islands, British Overseas Territories, and Tristan de Cunha.
The euro is commonly used in trading due to several factors, including influence on the global economy and price stability. Nineteen countries use euros as the official currency, all of which are within the European Union.
The G7 Summit
A meeting is held annually for the Group of Seven leaders, hosted by the G7 president for the year. This meeting is known as the G7 summit. Non-member attendees include other global leaders, such as representatives from China, India, Mexico, and Brazil.
The organization also invites leaders of prominent international organizations, including the World Bank, the United Nations, and the International Monetary Fund (IMF).
Although the summit does not hold any legal or political authority, it can drastically impact global economic growth.
The G7 aims to discuss and occasionally work to resolve global issues, specifically focusing on economic problems. The organization has launched initiatives that target and fund problems and alleviate crises where there is an opportunity to act in unison.
The 2021 Summit occurred at Carbis Bay, Cornwall, in the United Kingdom, from June 11 to June 13, 2021.
At this meeting, the organization pledged and committed to several things, including COVID-19 vaccines for developing countries, phasing out coal-fired power generation in G7 countries, and moving towards a global tax policy.
United States President Joe Biden also committed to supporting the G7 allies in advancing shared values on the global stage.
Summits In Past Years
Critics can observe the goal of the G7 over the past annual meetings. Although the G7 can serve a lot of good, they have missed the mark in some cases.
For example, consider the 2007 and 2008 summits. At the time, G7 was still G8 due to Russia’s participation in the organization. They had an opportunity to avoid or mitigate the 2008 economic recession but failed to do so.
The following year, in 2008, the G8 observed and addressed other significant world issues. Again, they failed to address the 2008 global economic crisis. Gas prices were at a record high, as were oil and food as a result of inflation.
Instead, the G20 countries stepped in at a summit of their own to address the problem. This resulted in a subtle power shift.
Other addressed subjects of the G7 summits range from focusing on commitments to world health, monetary contributions to struggling countries, and discussions surrounding terrorism issues.