Global markets slide after IMF warnings on the global economy
Global stocks declined today after the International Monetary Fund (IMF) released a report that downgraded global growth. The organization cited issues like the ongoing trade war and uncertainties over Brexit as the main reasons why the economy will not expand as initially projected. The markets decline was also associated with fears of the trade between the US and China after a report said that the US would proceed with the extradition of Huawei CFO from Canada. As a result, Hang Seng and CSI 300 declined by 1% and 1.3% respectively while in Europe, the FTSE and the DAX declined by less than one percent.
The sterling rose slightly today after positive economic data from the UK. The unemployment rate declined to 4.0% from the previously-released 4.1%. The average earnings plus bonus increased by 3.4%, which was better than the expected 3.3%. The employment change rose to 141K from the previous 88K. On a negative side, the claimant count increased by 20.8K, which was a slight miss from the expected 20K. Regarding Brexit, Jeremy Corbyn said that he would table a motion calling for another Brexit referendum, a move that many believe will not be successful.
The euro was little moved against the USD today after mixed economic data from the region. The German ZEW economic sentiment for January contracted to minus 15. This was slightly better than the consensus estimates of minus 18.4. The number comes from a survey of business leaders on their feelings about the country’s economy in the next six months. The ZEW current conditions for January slumped to 27.6, which was lower than the expected 43.5. For the EU, the economic sentiment declined by 20.9.
The GBP/USD pair rose slightly today after positive job numbers. The pair reached a high of 1.2925 but pared some of those gains. On the four-hour chart, the pair has been moving upwards with a channel as shown below. The price is along the short and medium-term EMAs, which is a sign that there is some consolidation. This is also shown by the RSI and the momentum indicators.
The EUR/USD pair continued the decline that was started on Monday last week when it started falling from a high of 1.1570. On the hourly chart, the pair’s current price of 1.1350 is below the short and medium-term moving averages while the average directional index (ADX) has risen to 32, a sign that the downward momentum could continue. This is also confirmed by the RSI, which is currently at 36 headed lower. If it continues, the pair will likely test the important support level of 1.1300.
The XBR/USD pair declined today as investors continued to worry about global growth. The pair reached an intraday low of 61.20 from a high of 63. On the hourly chart, the pair appears to have found a strong resistance near this level as traders question the way forward. This has created a consolidation that is evidenced by the moving averages and the Bollinger Bands as shown below. The Relative Vigor Index (RVI) has declined close to the neutral level while the On Balance Volume has started to rise.