New Report Shows World Growth Declining Has Little Effect on Forex Market

Yesterday, markets seemed too completely over the look a new report issued by the Bureau for Economic Policy Analysis. The volume of world trade fell in May, while industrial production was unchanged, an indication that the global economy has yet to embark on a strong recovery.

In its monthly report, the Netherlands Bureau for Economic Policy Analysis, also known as the CPB, Wednesday said the volume of exports and imports fell 0.3% from April, having risen 1.3% in that month. The decline in trade volumes was spread across the globe, although was sharpest in Central and Eastern Europe.  The CPB’s figures are watched closely by policy makers, including a number of central banks, because they provide the earliest available measure of global trade.

The CPB’s May trade figures are consistent with other indicators of economic activity, which have recently pointed to a sluggish global economy. Earlier this month, the International Monetary Fund cut its forecast for world growth this year to 3.1% from 3.3%. It also cut its forecast for world trade growth, which it now expects at 3.1%, down from 3.6% in April as reported by the Wall Street Journal.

The US dollar rose against major rivals, after data showed a pickup in the US manufacturing sector while new home sales were at a 5-year high. The ICE dollar index, a gauge of the greenback’s movement against six other major currencies, rose to 82.285 from 82.024. The dollar rallied across the board on Wednesday, bolstered by a rise in U.S. Treasury yields that indicate confidence in the economic recovery and expectations that the Federal Reserve will pare back its stimulus measures. Better-than-expected U.S. housing data also supported the dollar, which rose for the first time in four sessions against a basket of currencies. U.S. new-home sales jumped to a five-year high in June, while other data on Wednesday showed an acceleration in factory activity in July, boosting hopes of a third-quarter pick-up in economic growth.

The euro, on the other hand, fell from a one-month high of $1.3256 reached earlier to trade 0.2 percent lower on the day. German and French PMI surveys both beat expectations and led some investors to trim bets against the euro. The euro-zone’s PMI numbers improved more than expected. This supported gains in European equities while the euro fell 0.17% against the dollar and settled at 1.3201 due to strengthening Dollar index

The pound is trading in the green this morning at 1.5325, trading near a four-week high against the dollar, on expectations that UK growth numbers due this week will point to a sustained recovery. The UK will see quarterly GDP data later in the day.