The OECD cut forecasts again for the global economy in 2019 and 2020, further to previous November downgrades. There were warnings that trade disputes and uncertainty over Brexit would hit world trade and businesses.
The OECD forecast in its interim outlook reports that the world economy would grow 3.3% in 2019 and 3.4% in 2020. Those forecasts represented cuts of 0.2% points for 2019 and 0.1% points for 2020 compared to last November’s forecasts.
Europe remains impacted by uncertainty over Brexit, the U.S. – China trade dispute and signs of a recession in Italy.
Meanwhile, data earlier this month showed that U.S. personal income had fallen for the first time in more than three years in January. Further, consumer spending dropped by the most since 2009 in December. This means that the world’s biggest economy is on a relatively weak growth trajectory early in the first quarter.
China, the world’s second-biggest economy, has also faced signs of stuttering growth. However, the U.S. trade deficit surged to a 10-year high in 2018 with China hitting a record peak.
START TRADINGForex – OECD cut forecasts again for global economy
The Australian and Canadian dollars were the big movers in otherwise quiet FX markets. Expectations for the Reserve Bank of Australia and the Bank of Canada to tilt towards a more dovish stance follow pauses by other central banks in policy tightening in 2019 in the face of waning economic momentum.
Australian dollar fell to a two-month low as signs of an economic slowdown supported bets on an interest rate cut later this year. The Aussie dollar slid 0.8% to as low as $0.7024 after data showed economic growth was 0.2% in the fourth quarter, below an expected 0.%. That left the Aussie at its lowest since Jan. 4.
The Canadian dollar dropped again before the central bank’s policy decision. The BoC holds its policy meeting on Wednesday, with a decision due at 1500 GMT.
The euro touched a fresh two-week low against the dollar and Italian government bond yields fell further on Wednesday. A Bloomberg report said the ECB would reduce its outlook on inflation and is in discussions on a new loan program. The ECB is expected to re-launch long-term bank loans soon to revive the economy.
The U.S. dollar held near a two-week high after Tuesday’s strong service industries and new home sales data. The dollar index rose marginally to 96.907 after hitting a two-week high of 97.008 on Tuesday.
Sterling fell towards one-week lows on profit taking and renewed worries about next week’s parliamentary votes on Brexit.
The Japanese yen stood little changed at 111.87 yen per dollar.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.