Markets mixed on IMF gloom, Sterling boosted by Brexit noise

A gloomy mood continues to hang over markets after the International Monetary Fund (IMF) downgraded its economic growth forecast for the first time since July 2016.
Lukman Otunuga

Open your FXTM account today

A gloomy mood continues to hang over markets after the International Monetary Fund (IMF) downgraded its economic growth forecast for the first time since July 2016.

Escalating trade tensions and stresses in emerging markets are the main factors behind the IMF downgrading its growth forecasts for both 2018 and 2019 to 3.7%, down from the 3.9% just three months ago. The IMF left its 2018 U.S. and China forecast unchanged but downgraded growth projections in 2019 to 2.5% for the U.S. and 6.2% for China. The more concerning comment is probably the message that global growth is at risk to “plateauing” with the IMF also expressing that “everyone is going to suffer” from global trade tensions, meaning that the outlook for the global economy from this point is that there will be a potential downturn.

Asian stocks were mostly mixed during early trade as global growth fears encouraged investors to remain on the side-lines. With the unsavory combination of ongoing trade tensions, emerging market weakness and global growth fears denting risk sentiment, investors will be tempted to shun riskier assets and favor the Dollar as a safe-haven investment instead.

The British Pound has hit the ground running this morning on renewed optimism over Britain and the European Union securing a Brexit deal by Monday.

While this welcome development is likely to push Sterling higher in the near term, investors should remain diligent as it is likely too early for celebrations. We have had optimism before over Brexit progress, before later reversing back after all There still remains a thick cloud of uncertainty over the unresolved Irish border dispute, an issue that still represents serious headwinds. Even if a deal is struck before the fast approaching November deadline, it has to go through British parliament which represents another challenge of its own.

Away from Brexit, investors will direct their attention towards the UK’s monthly GDP reading scheduled for release this morning, with headline figures expected to hit 0.1% in August. A disappointing release may weigh on the British Pound and fuel concerns over Brexit negatively impacting the UK economy. However, the major driver behind the Pound in the medium to longer term will be the Brexit saga and how negotiations play out. With Brexit developments and politics likely to overshadow economic data in the coming weeks, the Pound is still instore for a wild rollercoaster ride.

In regards to the technical picture, the GBPUSD is pushing higher as risk hungry investors firmly clench on hopes of a Brexit deal being reached by Monday. With prices already breaking above the 1.3150 level, the next key level of interest will be around 1.3220.

The Dollar was dumped and Trumped yesterday after the U.S. President once again criticized the Federal Reserve for raising interest rates too quickly. While this form of verbal intervention by Donald Trump may promote short-term Dollar weakness, it is unlikely to change the medium- to longer-term bullish outlook. With Trump’s comment unlikely to impact the Federal Reserve’s interest rate increase cycle, the Dollar remains king. Taking a look at the technical picture, the Dollar Index could challenge 96.00 if bulls are able to keep above 95.50.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US