Crisis-End In Sight
Risk appetite has been given a further boost this week with the International Monetary Fund upgrading its global growth outlook at the group’s spring meet. In a display of optimism which has been largely shared by many of the G10 central banks and political leaders, the IMF said that as a result of the progress being made with vaccinations, the end of the current “health and economic crisis is increasingly visible”.
Global Growth To Improve
The IMF’s chief economist Gita Gopinath struck an upbeat tone over the impact from the latest US fiscal package as well as the pace of vaccinations in the US and, albeit on a smaller scale, around the world. With this in mind, Gopinath raised the group’s 2021 global GDPO forecast from 5.5% to 6% while growth is expected to increase by 4.4% in 2022, up from the prior estimate of 4.2% given in January.
US Recovery Advancing Quicker Than Elsewhere
Looking specifically at the US, Gopinath said that as a result of the $1.9 trillion in fiscal stimulus approved by president Biden, the IMF is forecasting growth of 6.4%, well above the average of 5.1% growth expected in advanced economies this year. The group now forecasts unemployment to fall back to 5.8% this year and 4.1% in 2022. This views echoes that of US treasury secretary Janet Yellen who opined earlier this year that the US could see a return to full employment as early as this year.
Risks Remain Ahead
However, the IMF’s update was not without warning and Gopinath was clear in stressing that “daunting challenges” and “high uncertainty” remain ahead, particularly with vaccinations in lower-income countries. Globally, currently, only around 3% of people have been vaccinated while in the US, almost 20% have been fully vaccinated now. Looking ahead, Gopinath said “the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.”
Dollar Down On Wage Growth Miss
Despite the IMF’s upbeat view on the US, over other advanced economies, the Dollar continues to sell-off midweek as traders dial back their Fed tightening expectations on the back of last week’s negative wage growth number for March.
Following the breakout above the bearish trend line from mid 2020 highs DXY has been trading higher within a tight bullish channel. However, selling pressure has kicked in ahead of a test of the 93.91 level with price now reversing under the bullish channel and heading for a test of 92.07, which will be a key pivot for price. While this level holds, a further push higher can still be seen. Below there, the 90.98 and 89.64 levels are back in play.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.