Published at 06:15 (GMT) 3 August
NKS/DJ : Failure of euro-zone policy makers to tame their growing debt crisis would likely trigger a severe regional economic contraction, force a fire sale of financial industry assets and trim the growth prospects of major world economies by several percentage points, IMF warned in new report Thursday. "What stands between the current situation and the playing out of the scenario is the residual public confidence that policy makers will ultimately act to avert the spread of the crisis," the IMF said in its 2012 Spillover Report. EU authorities don't act in time, the IMF said output in the euro area could be cut by 5%. Further, around 2% would be lopped off U.S. growth prospects, and output in China, Japan and the rest of the world would take a hit of around 0.5 to 2.5%%.
On FX, EUR/USD edging firmer in early Europe, despite the above IMF report, wit ECB Erkki Liikanen saying euro is irreversible - trying to talk up euro sentiment after yesterday's disappointment. EUR/USD at 1.2187-88, on bottom fishing from early Europeans, eye any M.E., sovereign demand. But offers at 1.2200-10 for now, with focus on downside risks. Bids at 1.2140-50, stops below 1.2130. Eye any Swiss, supranational, SNB related, Dutch, Europeans sales above 1.2200/50. GBP/USD at 1.5520-23, a tad supported by EUR/GBP selling interest. Offers at 0.7860-80 for EUR/GBP, while bids at 1.55/ 1.5450-60 for GBP/USD. WL