MARKET BRIEFING – LONDON OPEN 07.10.2015
As many have expected the International Monetary Fund has cut its global growth forecast for this year. The IMF has reduced its forecast by 0.2% from 3.3% to 3.1%. Furthermore, the IMF has also cut it’s estimated for 2016 from 3.8% to 3.6%.
These amendments to World growth were included in the IMF’s latest report in which it reiterate its pessimistic view on the global economy by saying “A return to robust and synchronized global expansion remains elusive”.
The IMF pointed to key areas of concern which it believed could play a significant part in stunting future growth.
Geopolitical risk
High on the agenda is the recent escalation of tensions in Syria and the Russian intervention to support the Government in Damascus.
The fears of escalating Geopolitical tensions and concerns that the fluid and unstable situations in Ukraine, Middle East and Africa could cause major uncertainty and further polarize the conflicting interests.
The Turkish Government has now gone as far as to hand out to its Russian counterpart a stiff warning. This followed Russian Airforce fighter incursion into Turkish airspace. The prospect of a NATO nation engaging the Russian military on the Syrian border is a worrying scenario and will do little to calm market volatility.
Lower oil and commodity prices
The IMF also mentioned bleak commodity picture which has done much to weaken, Russia, Australia, Nigeria and has led to belt-tightening in the Middle East. The decline in the price of Oil has in recent weeks stopped with Light Sweet Crude now trading back up to the US Dollar 50.00 per barrel.
Potential for a sharper than expected Chinese slowdown
The Chinese Government has a policy goal to evolve the nation’s economy from one that is an investment based to one that of a developed consumption profile.
The concern is that the Chinese economic metamorphosis is not managed correctly. This could lead to a larger than expected economic contraction. The prospect of the Chinese Government losing control of its tightly run economy could have unforeseen circumstances not just for China but the global economy. Furthermore, any over-correction could take a long time to fix. Therefore, China watchers will be hoping that any transition takes place with a soft economic landing.
Greece
Although Greece is no longer in the international headlines, the problems that this country faces are immense. The Greek people recently voted back into power a SYRIZA-led coalition with the Prime Minister, Mr. Alexis Tsipras being the unlikely poster boy of European austerity. The Greek issue has not been solved. The can has just been kicked down the road until the next crisis happens.
Emerging Markets
Some but not all of the Emerging Markets have been caught in the eye of a hurricane. This is due to a debt-fuelled binge, a strong US Dollar and a fall in commodity prices. The markets had expected that the United States Federal Reserve was going to increase interest rates in September. However, the decision to keep rates on hold and following the worse than expected jobs report, some of the pressure on Emerging Market economies has been lifted. That the FOMC has now included the risk of international conditions as a key area of concern should give the likes of Brazil and Malaysia some hope in the medium term.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1380
Target 2: 1.1600
Projected range in ATR’s: 0.0113
Daily control level: 1.1170
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5330
Target 2: 1.5120
Projected range in ATR’s: 0.0106
Daily control level: 1.5135
USDJPY
The intraday technical outlook
Trend 1 hour: Up
Target 1: 121.50
Target 2: 119.25
Projected range in ATR’s: 0.96
Daily control level: 118.70
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9755
Target 2: 0.9570
Projected range in ATR’s: 0.0092
Daily control level: 0.9765
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3140
Target 2: 1.2930
Projected range in ATR’s: 0.0106
Daily control level: 1.3135
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7245
Target 2: 0.7085
Projected range in ATR’s: 0.0081
Daily control level: 0.7050
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1162.00
Target 2: 1131.00
Projected range in ATR’s: 15.52
Daily control level: 1129.60
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 51.00
Target 2: 47.50
Projected range in ATR’s: 1.80
Daily control level: 46.00
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