#Daily_market_report Euro Declines to Nine-Year Low on Stimulus Outlook - World Bank Cuts Global Growth Outlook With U.S. Lone Bright Spot - GBP/USD in tight range around 1.5150 The euro fell to a nine-year low as officials fueled speculation that the European Central Bank will begin buying government bonds as early as next week to stave off deflation. The euro dropped 0.5 percent to $1.1773 at 5 p.m. New York time and touched $1.1753, the weakest level since 2005. Europe’s common currency fell 0.9 percent to 138.83 yen. The yen rose 0.4 percent to 117.93 per dollar after reaching 117.54, the strongest since Dec. 17. The euro fell after ECB Governing Council member Ewald Nowotny said during a panel discussion late yesterday in Vienna that policy makers must treat the threat of deflation seriously and shouldn’t delay a response. Executive Board member Benoit Coeure was quoted in an interview with Die Welt that the ECB is “in a position to take a decision on Jan. 22.” The euro has fallen 2.5 percent in the past month against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes, as the dollar gained 3.9 percent, reflecting the divergence in policy outlook between the ECB and the Fed. The ECB cut its deposit rate to less than zero for the first time in June and lowered its refinancing rate to 0.05 percent, while the Fed has signaled it is moving toward increasing borrowing costs. The World Bank cut its forecast for global growth this year, as an improving U.S. economy and low fuel prices fail to offset disappointing results from Europe to China. The world economy will expand 3 percent in 2015, down from a projection of 3.4 percent in June, according to the lender’s semiannual Global Economic Prospects report, released today in Washington. The report adds to signs of a growing disparity between the U.S. and other major economies while tempering any optimism that a plunge in oil prices will boost output. Risks to the global recovery are “significant and tilted to the downside,” with dangers including a spike in financial volatility, intensifying geopolitical tensions and prolonged stagnation in the euro region or Japan. The World Bank is the latest institution to lower its global estimate amid a recovery that has repeatedly disappointed policy makers. The International Monetary Fund trimmed its 2015 outlook in October to 3.8 percent, citing weak demand and residual debt from the financial crisis. The IMF plans to update its global forecast next week. The 19-nation euro area is projected by the World Bank to grow 1.1 percent in 2015, down from a June estimate of 1.8 percent. China will expand 7.1 percent, down from the 7.2 percent pace the bank projected in October and a 7.5 percent estimate in June. Japan will expand at a 1.2 percent clip, down from the 1.3 percent projected in June, according to the bank. The sterling is trading without a clear direction vs. the greenback on Wednesday, taking GBP/USD to meander between 1.5140 and 1.5180 so far. Spot seems to be fully recovered after yesterday’s 15-year low from the CPI figures, with consumer prices in the UK economy climbing at an annual pace of 0.5% during December. Poor inflation figures sent the pair to the 1.5080 area, or 3-day lows, although the pound managed to regain the 1.5100 handle and keep the trade in the mid-1.5100s so far. Nothing in terms of data releases ahead in the day, but the speech by Governor M.Carney will be in the centre of attention during the European afternoon. Have a good day!
Posted on: Wed, 14 Jan 2015 08:51:38 +0000
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