IMF Lowers Global Economic Growth Forecast
Amid a quiet day in terms of economic releases in the UK, the Pound reversed its early session losses against the US Dollar. Tomorrow, Sterling investors will keep a tab on the minutes of the most recent BoE policy meeting and the official labour market report in the UK for further direction.
Across the Atlantic, the IMF upgraded its economic growth forecast for the US to 3.6% from 3.1% earlier today. However, the international agency lowered its global growth forecasts for 2015 and 2016. In the Euro zone, German ZEW survey for January is expected to show an improvement in sentiment among domestic investors, amid recent speculation that the ECB might loosen its policy stance going forward.
Pound Sterling – UK Markets
The Pound is trading on a firmer footing against the greenback this morning, helping the Pound-US Dollar pair recover some of its early session losses. In a noteworthy development today, the IMF lowered its global growth forecast for 2015 from 3.8% to 3.5%.
Going forward, market participants are likely to remain focused on the minutes of BoE’s latest policy meeting tomorrow, which is expected to show that voting patterns among policymakers remain unchanged as most officials continued to vote for no change in interest rates. However, the minutes will be further scrutinised to gain clarity over the timing of an interest rate rise in the UK, particularly amid prospects that the ECB might implement a quantitative easing programme in the Euro zone. Additionally, the UK labour market report tomorrow is expected to show that growth in domestic earnings improved for the three months ended November and suggest that the slack in Britain’s labour market is decreasing. Furthermore, with signs of an improvement in domestic wage earnings, Britain’s inflation measure will be closely eyed going forward.
US Dollar – US Markets
The greenback is trading on a firmer footing against most of its major peers this morning ahead of today’s NAHB housing market reading in the US. This reading is anticipated to show an upswing for January, especially with US labour market growth remaining robust of late and considering that US home mortgage applications for the first week of 2015 climbed by the most in more than six years. Furthermore, it also remains to be seen if steadily falling mortgage rates have boosted sentiment among home builders recently. Going forward, investors will eye tomorrow’s housing starts and building permits numbers in the US to gain an insight into December’s housing market activity. Meanwhile, the IMF raised this year’s growth forecast for the US to 3.6% from its previous forecast of 3.1%, citing more robust private domestic demand. With limited economic data from the US during the upcoming trading sessions, focus shifts to key events scheduled across the pond.
Yesterday, the greenback lost ground against the Euro and the Pound amid limited participation as US markets were closed on account of Martin Luther King Jr. Day.
Euro – European Markets
Data released earlier today showed that Germany’s producer price inflation for December declined at its strongest pace since February 2010, strengthening concerns that low oil prices continued to stoke the region’s deflationary momentum. The Euro has shown little reaction to today’s data and has continued to trade lower against the greenback. Going forward, traders will eye the ZEW surveys in Germany and in Euro zone today which are anticipated to show an improvement in domestic investors’ morale for January, especially amid prospects that the ECB might loosen its stance in this week’s policy meeting.
The Euro gained ground against the greenback yesterday and briefly crossed the 1.16 mark. However, downbeat current account data, coupled with expectations that the ECB might unleash a sovereign bond buying programme in its upcoming policy meeting this week, capped gains in the Euro. Additionally, with elections scheduled in Greece due over the weekend and with recent polls indicating that the nation’s leftist Syriza party has extended its lead over its rivals, the single currency is anticipated to remain under pressure against its major peers.
Other Currencies – Highlights
The Swiss Franc lost ground against its major peers in yesterday’s trading session. Data released in Switzerland showed that producer and import price index for December declined at its strongest pace since June 2012, amid low oil prices and deflationary headwinds blowing from the Euro area. Yesterday’s downbeat data raised additional concerns among investors, especially considering that the Swiss National Bank’s recent move to remove its minimum forex rate cap against the Euro is likely to weigh on Switzerland’s export dominated economic growth.
With little on the domestic macroeconomic front, investors will keep a tab on tomorrow’s ZEW economic sentiment survey in Switzerland for further direction. Moreover, with the ECB’s policy meeting scheduled later this week where the central bank is expected to announce additional stimulus in the Euro zone, investors in the Euro-Swiss Franc pair are likely to remain on their toes.