Fundamental Comment

Forex market update: Global slowdown fears prevail ahead of IMF meeting

Forex market update

Taking a deep look into the latest updates in the forex market, it is crystal clear that worries over global economy slowdown prevailed on Thursday ahead of the kick off of the International Monetary Fund’s spring meeting.   

Worries from key central banks regarding global slowdown have persisted in markets, resulting in the fall of most Asian stocks, with China’s CSI 300 index ending 2.16 percent down.

Last night, the Fed minutes for March policy meeting said: “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.”   

By the same manner,  the European Central Bank revealed yesterday that “the risks surrounding the euro area growth outlook remain tilted to the downside.”

The IMF downgraded the world’s economy growth outlook to 3.3 percent expansion this year, which is 0.2 percent down from January’s estimates, citing US-China trade war and risks of a no-deal Brexit.

Later in the day, eyes will focus managing director Christine Lagarde as she will hold a press conference to formally open its Spring Meeting in Washington.

Dollar inches up amid mixed Fed minutes signals

The dollar index rose slightly to 96.52, following its plunge over the previous three sessions, on mixed signals from the Fed minutes released late on Wednesday.

Some Fed members were ready for the possibility of interest rate increases before the end of the year, the minutes indicated.

However, the majority went for the possibility of leaving interest rate unchanged until the end of the year.

It seems that the dollar is attempting to taking advantage of the undergoing worries, given its acquired safe haven characteristic.

The dollar failed to hold gains after U.S. CPI inflation data that signaled a more than forecast rise to the highest level in 14 months in March.

U.S. producer prices, due at 12:30 GMT, may refer to a 0.3 percent soar in March after a 0.1 percent advance in February.

US-China trade talks continue

Negotiations between the U.S. and China will resume early on Thursday Washington time after the latest progress as both sides agreed on establishing new enforcement offices.

"We've pretty much agreed on an enforcement mechanism, we've agreed that both sides will establish enforcement offices that will deal with the ongoing matters," U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

It is worthwhile to mention that U.S. President Donald Trump has mentioned recently that a deal could be ready around the end of April.

Pound unable to rise despite Brexit extension

The British pound was unable to rise on Thursday, where it traded near the session’s open at $1.3086, despite the EU’s approval to offer the UK an extension on article 50 until October 31.

While the six-month extension has eased tensions of leaving the EU bloc without a deal on Friday, many analysts have warned of prolonged uncertainty and its adverse impact on the economy.  

The cable soared on Wednesday after a better than forecast UK growth of 0.3 percent in the three months through February.

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