Euro attempted to recover earlier today after ECB governing council member Nowotny, also head of Austrian central bank, said that current Euro exchange rate it’s not a major concern to him. He said that short-term fluctuation of exchange rates should not be overvalued and he doesn’t see a “perspective of a long-term trend”. He also said that the “panic situation” is over and Eurozone is in a “clearly much more stable surrounding now”. And, there is a “reason for cautious optimism”. He expected Eurozone economy to contract in 2013 but the turning point would be in Q1 and there will be a “clear revival for economic growth” in 2014. Yesterday, Euro was weighed down by Eurogroup head Juncker’s comment that Euro exchange rate is “dangerously high”. Though, markets were calmed from initial reaction to Juncker’s comment as it’s skeptical that whether ECB shared the same view, and Juncker is going to step down later this month. Indeed, Nowotny’s comments showed affirmed that at least not everyone is concerned with the euro’s rate. Nonetheless, the recovery was relatively brief and the EUR/USD, as well as EUR/JPY is back under pressure in early US session.
Inflation data from US saw CPI dipped to 1.7% yoy in December. Core CPI was unchanged at 1.9% yoy. Swiss retail sales rose less than expected by 2.9% yoy in November. Eurozone CPI was finalized at 2.2% yoy in December, unchanged from November reading. Core CPI rose slightly to 1.5% yoy. Australian Westpac consumer confidence rose slightly to 100.6 in January. Japan domestic CGPI rose 0.3% mom in December. Machine orders rose 3.9% mom in November. Consumer confidence dropped to 39.2 in December.
The World Bank sharply lowered its 2013 global growth forecast to 2.4%, comparing to prior projection of 3.0%. That’s just a slight improvement from 2.4% in 2012. The World bank noted that global recovery is expected to be “closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier.” It warned that the “global economic environment remains fragile and prone to further disappointment” even though risks are less skewed to the downside now. And, it noted that policy uncertainty in US has already dampened growth and warned that Should policymakers fail to agree such measures, a loss of confidence in the currency and an overall increase in market tensions could reduce U.S. and global growth by 2.3 and 1.4 percent respectively.”
For advanced economies, growth is expected to be very weak at 1.3% in 2013 as weighed down by austerity, high unemployment and sentiments. That’s a sharp downward revision from June’s forecast of 1.9%. Growth is then expected to recover slightly to 2% in 2014 and 2.3% in 2015. US is expected to grow 1.9% in 2013, Eurozone to contract -0.1%, Japan to grot at 1.5%. For developing countries, growth is expected to be the slowest in a decade at 5.5% in 2013, also revised down from June’s projection of 5.9%. Growth is then expected to pick up to 5.7% in 2014 and 5.8% in 2015. China’s growth is expected to rise to 8.4% in 2013 then slow to 7.9% by 2015.
EasyForexNews Research Team