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Forex News: Euro Tumbles After IMF Cuts World Growth Forecast

Forex News: Euro Tumbles After IMF Cuts World Growth Forecast

Christopher Vecchio, CFA, Senior Strategist

THE TAKEAWAY: International Monetary Fund Cuts Growth Estimates > Cites Euro-zone Crisis as Drag on Global Economy > EURUSD BEARISH

The IMF has altered its World Economic Outlook, and the revisions are not cheery for 2013. In the first revision since the growth projections were released in October, the IMF cut the global growth forecast from +3.6% to +3.5%, citing issues in the Euro-zone, which “continues to post a large downside risk to the global economy.”

Mirroring commentary provided by various developed economies’ policymakers over the past several months, the IMF found that global growth should improve in the 2H’13, and that growth should be much stronger in 2014. Here are some key figures to consider (sorted by: country/region; October growth forecast; January revision):

- United States: +2.1% revised to +2.0%

- Euro-zone: +0.2% revised to -0.2%

- Japan: +1.2% unchanged

- China: +8.2% unchanged

EURUSD 1-minute Chart: January 23, 2013

Forex_News_Euro_Tumbles_After_IMF_Cuts_World_Growth_Forecast_body_Picture_1.png, Forex News: Euro Tumbles After IMF Cuts World Growth Forecast

Charts Created using Marketscope – Prepared by Christopher Vecchio

With the Euro-zone as the primary reason the World Economic Outlook was downgraded, the Euro slid soon after the report was released. The EURUSD dropped from 1.3335 to as low as 1.3263, before rebounding to 1.3294, at the time this report was written. Downside pressure was observed in the British Pound and the Swiss Franc as well, which is of little surprise given each country’s strong trade ties with the Euro-zone.

--- Written by Christopher Vecchio, Currency Analyst

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