IMF Slashes Growth Forecasts [ May 14th, 2009 ] Posted in » Forex News

Forex news continues to be predictably grim. Last month, the International Monetary Fund (IMF) slashed its growth forecast for every major country and predicted that the global economy will contract 1.3% this year, although the IMF did issue a sliver of hope that it would grow 1.9% next year, depending on the state of the financial system. Until then, however, forex trading is expected to remain volatile.

The U.S., which the IMF said is at the epicenter of the crisis, is expected to contract 2.8% this year, and recovery is unlikely until 2010. However, the U.S. recession may ease before the Eurozone recession due to earlier distribution of stimulus funds and the U.S. government’s aggressive actions to restore liquidity. In comparison, the Eurozone economy is expected to contract 4.2% this year and another 0.4% next year, signaling the need for EU countries to coordinate a comprehensive, collective response to the crisis.

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Recession Outlook Grim

Most analysts agree that the dollar’s rally in online forex trading throughout the fall was bound to be ephemeral, and with 2009 underway, the EUR/USD climb back upwards has begun. In December 2008, the dollar was up almost 20% against a basket of currencies, but since then, the weakening forex trend has taken hold as the economy continues to worsen on rising unemployment numbers that reached a 26-year high last month, a still-soft home market, volatile stocks, and the increased risk of deflation.

A UCLA Anderson Forecast report in mid-December said that although crude oil prices have dropped dramatically, the resultant fall in the absolute level of consumer prices is likely to do damage to the GDP in the next three quarters, causing it to shrink by 4.1%, 3.4%, and 0.8% respectively. The report also predicts that spike in unemployment will continue through 2009, hitting a projected 8.5% in December 2009.

January 30th, 2009 | Leave a Comment

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