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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Consumer Confidence at All-Time Low

The January plunge in consumer confidence to touch an all-time low of 37.7 sparked a rally for the USD in online trading, although GFT Director of Currency Research Kathy Lien called the trend a “reflection of more panic selling and not optimism about US economy.” She cautioned that confidence may not be restored until job security is no longer an issue—but with unemployment spiking to 7.2% and most analysts predicting that recovery will not be possible until 2010 at the very earliest, increased consumer confidence may be very far off indeed. In the meantime, any dollar gains in online forex trading are expected to be ultimately insubstantial.

Given the dreary consumer outlook, it’s not surprising that fourth-quarter GDP also fell to the weakest level in 26 years and house prices dove another 18.18% in November for the largest recorded decline. The sole bright spot, according to Lien, is the projected increase in car sales in the next six months as consumers look to capitalize on the discounts being offered to move inventory.

February 20th, 2009 | Leave a Comment

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