The IMF's lower global growth forecasts still look a little optimistic and it seems too early to jump back into pro-cyclical currencies.

USD: IMF slashes growth forecasts and pins hope on an EM rebound

Revising down its world growth forecasts for 2019 to 3.0% (from 3.3%) and 3.4% (from 3.6%) respectively, the IMF is still pinning its 2020 recovery hopes on some of the large emerging market nations, such as India, Russia, Brazil, Mexico and Africa. Advanced economies are expected to languish at 1.7% growth in 2020, the same as 2019. These forecasts feel a little optimistic to financial markets right now, which would like to see some concrete improvement in geopolitical and trade relations. As such, it seems too early to be jumping back into pro-cyclical currencies. Immediate points of concern include US-China relations. It seems China may want some existing tariffs rescinded before even signing up to the Phase One deal announced last week. We’ll also be keeping close watch of the USD/CNY fixing, which nudged higher last night after nearly a month of flatlining. For today, we see a speech (1645CET) from Federal Reserve dove Charles Evans, who favours another insurance cut (now 73% priced for 30 October). And we’ll also see September US retail sales, expected to hold up and confirm the divergence between the consumer and business sectors. With emerging markets staying fragile, and a good part of the Brexit rebound already priced into European FX, we expect DXY to find support in the 98.00/98.20 area.

EUR: Along for the ride

European FX has been lifted by progress on Brexit discussions and could find a little more support into the weekend. But we prefer a 1.0980-1.1080 EUR/USD range.

GBP: Sizing the squeeze

Sterling is undergoing a vicious short squeeze, which may have a little further to run over coming days. Later today, we should hear whether UK-EU negotiators have got a deal over the line – which would then be rubber-stamped by EU leaders on Friday. The debate would then move onto to whether Prime Minister Boris Johnson could go one better than his predecessor and secure parliamentary approval for the deal in a Saturday sitting of parliament. Unless a deal fails to materialise later today, we’d say GBP/USD could squeeze higher into the 1.2880/2900 area with EUR/GBP standing an outside chance of 0.8500 before the weekend.

Commodity bloc: data to help CAD and AUD

While global risk sentiment remains fragile and is keeping the outlook for activity currencies negative, markets will focus on some key data today. In Canada, September CPI should continue to hover around the 2% Bank of Canada target mid-point, further denting the (already low) BoC easing expectations and keeping a lid on USD/CAD.


Read the original analysis: FX Daily: IMF forecasts provide little comfort

Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here:

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD nears daily highs amid the prevalent good mood

The market is cautiously optimistic about trade war headlines, with action limited as investors wait for fresher clues. EU’s manufacturing activity stagnated, services output improved just modestly in December.


GBP/USD consolidating post-election gains

The GBP/USD pair remains confined to the 1.33/1.34 range, easing within range after disappointing preliminary December Markit PMI. Brexit optimism limits the downside.


The phantom of fear pierces crypto market foundations

Negative technical indicators are extremely volatile and are approaching a technical rebound. Ethereum has fundamentals in play versus Bitcoin which could be lethal. XRP is not immune to downfalls and adds to the dangerous game of critical supports.

Read more

Gold consolidates in a range, flat-lined around $1475 level

Gold extended its sideways consolidative price action through the early European session on Monday and remained confined in a narrow trading band near the $1475 region.

Gold News

USD/JPY: Holding on to higher ground but lacking momentum

Positive developments between the US and China keep the mood up. Japanese data mixed, industrial figures continue disappointing. USD/JPY needs to advance beyond 109.72, December monthly high.


Forex Majors