IMF downgrades global growth forecast

On a day with no UK data released, Sterling gained against most of its major trading counterparties ahead of the release of the latest Monetary Policy Committee (MPC) Official Bank Rate Votes today. Following a brief dip below 1.5100 (interbank), GBP/USD resumed its advance and managed to reach fresh daily highs at the start of the session stateside, but Sterling lacked momentum to break above the 1.5200 IB psychological level and retraced. GBP/EUR dipped its toes below 1.3000 IB briefly in early trading, before finishing the session back above the 1.3100 IB handle. The breakdown of the aforementioned voting from the latest MPC meeting provides a valuable insight into which MPC members are changing their position on interest rates and how close the committee is to enacting any rate change. Any deviation from the 7 – 2 stance adopted by the BoE policy makers since August last year is likely to have a large effect on Sterling this morning. Other discernible data released today includes the Average Earnings Index 3m/y and the Claimant Count Change, which is expected to show a further decline in the number of people claiming unemployment benefit in the UK.

The Euro resumed its downfall yesterday despite positive data released above analyst consensus from the powerhouse economy of Germany. Data released in the form of the German ZEW Economic Sentiment indicated that the vast majority of German institutional investors and analysts were optimistic about current and future business conditions and economic outlook. The release had little impact on the market, and it now seems that all market attention is focused on the Economic Central Bank meeting tomorrow. Although the markets have started to price in EUR €500Bn in asset purchases being announced tomorrow, if this comes to fruition we can still expect the euro to weaken further. Conversely, if the hype surpasses the actual announcement then we can expect the euro to claw back recent losses. Fundamentally a quantitative easing programme will be a drag on the EUR’s overall performance in the short term, especially as the policy prospects between the US, the UK and Eurozone are diverging conspicuously.

With little data released across the pond yesterday EUR/USD went through a phase of consolidation, with the aforementioned economic data from the Eurozone failing to trigger any movement ahead of the ECB meeting. EUR/USD briefly rose above 1.1600 IB to reach a high of 1.1615 IB before sliding back to the 1.1570 support level. The only discernible data released from the US today is the Building Permits for December, which is expect to show an increase on the previous month and can be significant due to the figure being a good gauge of future construction activity as obtaining a permit is among the first steps in constructing a new building.

In other news The International Monetary Fund (IMF) has lowered its global economic growth forecast for this year and next. The IMF has revised the figure to growth of 3.5% this year, compared with the previous estimate of 3.8% in October. The growth forecast for 2016 has also been downgraded, to 3.7%. The downgrade to the forecasts comes despite one major boost for the global economy - the sharp decrease in oil prices, which has been seen as positive for most countries.