Tag Archives: IMF

IMF Cuts Global Growth Outlook For 2014

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: U.S. Core Durable Goods @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

IMF Cuts Global Growth Outlook For 2014

The International Monetary Fund has downgraded its global growth forecast for 2014 based on a weaker than expected first quarter, most notably in the U.S. and a less optimistic outlook for several emerging markets. The global economy is expected to expand 3.4 percent this year, a decline of 0.3 percentage points from April’s estimate, but still an improvement from 3.2 percent in 2013.

The IMF cut its 2014 growth outlook for the U.S. by 1.1 percentage points to 1.7 percent on the basis that while a rebound is underway, it is only expected to provide a partial offset to the weak first quarter outcome given a muted recovery in investment. The U.S contracted at an annual pace of 2.9 percent in the first three months of the year, the sharpest decline in five years, owing to a weak housing market, a slower pace of restocking by businesses and lower exports.

Growth in the euro zone is expected to strengthen to 1.1 percent, from a 0.4 percent contraction last year but the recovery will remain uneven across the region, reflecting continued financial fragmentation, impaired private and public sector balance sheets, and high unemployment in some economies. The IMF downgraded its overall growth outlook for emerging markets to 4.6 percent, from an earlier 4.8 percent and down from 4.7 percent in 2013. With somewhat stronger growth expected in some advanced economies next year, the IMF maintained its 2015 global growth forecast of 4.0 percent.

Japan Inflation Slows In June

Japan’s inflation slowed in June, highlighting the task the bank faces in reaching the bank’s target. Consumer prices excluding fresh food rose 3.3 percent from a year earlier after a 3.4 percent gain in May. The increase matched economists’ projections. Kuroda has said inflation will ease in coming months before accelerating later this year toward the BOJ’s 2 percent goal, which strips out the effects of a sales-tax increase in April. As the impact of the yen’s slide on prices fades, some economists say the central bank may add stimulus should price gains drop below 1 percent, a level Kuroda forecast they wouldn’t break. The BOJ estimated the 3 percentage point increase in the sales levy added 2 percentage points to core inflation in May. The yen has strengthened about 3.5 percent against the dollar this year after a 18 percent decline in 2013 raised prices of imported energy and other goods. The Japanese currency rose 0.1 percent to 101.76 while the Topix index of stocks rose 0.4 percent to extend its weekly advance.

Gold Heads For Second Weekly Loss On Strong Data

Gold retained sharp overnight losses to trade near a five-week low on Friday and headed for a second straight week of losses as strong global economic data offset the metal’s safe-haven appeal. Gold’s decline despite tensions in the Middle East and Ukraine does not fare well for prices in the short term, especially as physical demand in Asia is sluggish. Spot gold was little changed at $1,292.10 an ounce after losing nearly 1 percent on Thursday. The metal hit $1,287.46 in the previous session, its lowest since June 19 before recovering slightly. Gold has lost 1.4 percent of its value this week. Gold came under pressure after data on Thursday showed the number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8 1/2 years last week, suggesting the labour market recovery was gaining traction.

That sums up today’s highlights! Don’t forget to keep in touch with us via our Facebook, Twitter, Google+ & LinkedIn pages for all the latest trading developments of the day. We hope you have a profitable day on the markets.

Euro Hovers Near Lows As Draghi Speech Awaited

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: EUR President Draghi Speaks @ 08.00 GMT

WHAT WE’RE WATCHING TODAY

Euro Hovers Near Lows As Draghi Speech Awaited

The euro touched a new three-month low against the dollar today as investors awaited comments from ECB head Mario Draghi and took on board the results of the weekend elections. Critics of the European Union more than doubled their presence following the elections, as voters registered discontent over immigration, austerity and unemployment. Although it is unlikely that Draghi will say anything new or surprising, his speech will be closely watched for any signals about the ECB’s next steps. The euro has fallen more than 2 percent on the greenback since May 5 against a backdrop of rising expectations that the ECB will ease policy next month, which in turn increased wagers on the common currency coming under pressure. The Euro last traded at $1.3619, down about 0.1 percent on the day. Early in the session, it briefly dipped to $1.3615, a low not seen since mid-February. Against its Japanese counterpart, the euro slipped about 0.2 percent to 138.80 yen. Traders said the policy outlook will continue to be a negative factor for the euro rather than results of the weekend elections.

Gold Steady Below $1,300 As Ukraine Elections Eyed

Gold continued to hover below $1,300 an ounce on today after ending flat for two straight weeks but the metal could gain from developments in the Ukraine where pro-West billionaire Petro Poroshenko claimed the Ukrainian presidency on Sunday. Analysts say the relationship between Russia and the newly elected president in the Ukraine will be key for gold prices. Since the new president is not pro-Russia, it could make Ukraine more divided. There is still a lot of uncertainty and political risk there, which could boost gold’s safe-haven appeal. Spot gold was steady at $1,293.01 an ounce after ending flat for a second straight week. The metal has closed between $1,291 and $1,296 in the last seven sessions. Liquidity is likely to be thin today with U.S. markets closed for Memorial Day and Britain shut for a bank holiday.

Lagarde: Central Banks Should Cooperate On Policy Moves

IMF Managing Director, Christine Lagarde is urging central banks to cooperate on policy moves as the Federal Reserve debates the timing of its first interest rate hike since 2006. Lagarde stressed that in times of distress, the potential gains from cooperation can be huge by reducing the risk of tail events with large international feedback effects. The Fed and the Bank of England are expected to start raising interest rates in 2015. The Fed’s decision to unwind quantitative easing last year threw emerging markets into turmoil, prompting sharp currency and equity market declines in India, Indonesia, Brazil, South Africa and Turkey, and underscoring the impact of Fed policy on global markets. The case for policy cooperation may seem less compelling as urgency fades with the global economy turning a corner and as the gains from cooperative policy responses are unclear but it is precisely this uncertainty that would make us remiss in discounting the gains from cooperation in a post-crisis. Reducing vulnerabilities and reinforcing macroeconomic and financial frameworks should be the order of the day for emerging markets-and indeed for all countries according to Lagarde.

That sums up today’s highlights! We hope you have a profitable day on the markets.

Central Banks Easing The Way To The Bottom

The way out of the global financial crisis that set its talons into the global economy in 2008 has proven quite precipitous as nations race-not so as to be the first to climb out of it, as one might have expected, but to be the first to hit rock bottom, apparently.

The European Central Bank shocked the financial world last Thursday when it cut its refinancing rate to a record low of 0.25 percent amidst equally shocking low inflation rate, despite the euro’s climb to its highest level since 2011 in the preceding weeks. The rate cut that caused the euro to drop 1 percent against the US dollar in the very day is expected to restrain the euro at decidedly lower levels in the near future.

The ECB’s move, however, was not an isolated incident, but only one skirmish in the more general shock-therapy strategy central bankers across the globe seem to have adopted over the last year. On 11th September, the day of the ECB rate-cut announcement, Czech policy makers advised they would be weakening the koruna, intervening in the foreign exchange market for the first time in over a decade. New Zealand has also dropped hints about delaying rate increases in order to moderate the strength of its dollar, while Australia considered its currency to be lingering at “uncomfortably high” levels. And all this just in the current month.

Last month, the US put all major currencies through a roller-coaster ride as speculators tried to predict the future of the U.S. government’s quantitative easing programme and the limit of the country’s debt ceiling. Policy makers suspended governmental operations for over a fortnight with the Federal Reserve finally deciding not to begin curtailing its economic stimulus until further signs of growth in the economy.

Last spring, economists anticipated that the Bank of Japan would ease its cash flow, but none expected the $1.4 trillion monetary mega-stimulus that it scheduled for release over a span of less than two years.

Amidst this new era of “currency war,” as the competitive currency devaluation was termed by Brazil’s Finance Minister in 2010, and with inflation preventing further investments by its agonisingly slow pace, the International Monetary Fund has spoken about the prospect of downgrading the global economy to urge central bankers to refrain from weakening currencies as a means for boosting competitiveness.

Will Greece Fail to Meet Its Next Bailout Target?

The IMF’s latest Fiscal Monitor Review published on Wednesday predicts that Greece may miss its next bailout target, since the country’s budget surplus has only risen to 1.1% of gross domestic product, failing so far to hit the target of 1.5% of GDP set by the IMF and the Eurozone in the bailout terms. Although Greece was predicted to be on track to meeting its targets in the IMF’s last report in April, problems with tax collection, slow growth, and delays in selling off state assets put Greece’s progress in the bailout programme in jeopardy. Should the country fail to meet its main objective, its emergency creditors (the IMF, the European Commission, and the European Central Bank) won’t proceed to issuing the next round of bailout financing, a factor likely to add pressure to the already tense negotiations over the upcoming tranche to help the troubled economy.
Source: Wall Street Journal

IMF to Give Cyprus €1bn

As part of the €10bn troika rescue package, International Monetary Fund contributes 1 billion euros. IMF president Christine Lagarde told the press that the monetary fund will give Cyprus a three-year loan to assist the country with efforts to restructure the ailing island nation’s sickly banking sector. Lagarde said that “the IMF has reached staff level agreement with the Cypriot authorities on an economic programme that will be supported by the IMF jointly with the European Union and the European Central Bank”. As part of the bailout, Cyprus’s second largest banks, Laiki Bank will be shut while Bank of Cyprus will have to go through serious restructuring.

Finland Behind Tough Bailout Terms?

News reports on Tuesday suggested that Finland, one of the few eurozone countries with a triple-A rating, was suspected to have been behind the unprecedentedly severe rescue package conditions for Cyprus.

During past bailout negotiations, Finland wanted - perhaps rightly so - to establish itself as the responsible adult in the room. Unlike many southern European states with mismanaged economies, Finland learned the lessons of its banking crisis and the subsequent recession 20 years ago.

Finland’s impatience in the face of sloppy fiscal policies prompted analysts to speculate about the country’s future in the eurozone. For instance, Nouriel Roubini, one of the most respected prognosticators of global economic trends, has often argued that Finland will eventually be the first country to leave the single currency. However, it should be remembered that Finland has also benefited from the euro, mainly in terms of paying lower interest on debt which significantly benefits Finnish companies.

Nevertheless, Finnish opposition to the euro is rapidly growing. Finns feel that they are constantly paying for other countries mistakes. Germany is often viewed as the most uncompromising in its bailout demands, but if recent reports are any indication, Finland is the bad cop in the eyes of Europe’s debt-ridden economies.

During the latest negotiations between IMF, EMU and Cyprus, Finland was reported to have been responsible for the levy tax obliging Cypriots to pay up to 10 per cent of their savings to foot the costs of the rescue package. However, Finland has rarely succeeded in its demands as the Greek and Spanish bailouts showed. Tough posturing is meant for domestic consumption to keep the critics at bay. The Finnish euro bailout dance usually starts with the finance minister Jutta Urpilainen and prime minister Jyrki Katainen rejecting reports that a given Mediterranean country is in need of a massive bailout. When the bailout becomes a reality, both Katainen and Urpilainen calm the public that Finland will not give a cent unless it received guarantees. After it becomes clear that other eurozone countries do not subscribe to Finland’s line of thought, the bailout passes without guarantees and Urpilainen and Katainen stand in front of the the Finnish media explaining that cooperation comes with a responsibility to compromise.

Henry James once said that a good compromise is reached when both sides are unhappy. In Finland’s bailout dance, only the Finnish tax payer is left unhappy.

The euro might very well survive the possible departure of Cyprus from the eurozone, but if Finland departs, all bets are off.

You Might Also Like...

You Might Also Like...

You Might Also Like...

You Might Also Like...

Sign Up to Open an Account at Banc De Binary