EUR/USD MARKET OUTLOOK

In a surprising announcement, World Bank officials have downgraded growth forecasts for the global economy in the upcoming year. The announcement is weighing heavily on major currency advancements, particularly the EURUSD. Continuing off of yesterday’s decline, the single currency still remains below 1.3320 support.

World Bank Lowers Growth

Officials at the Washington based bank today forecasted global growth to remain lackluster in 2013, as austerity measures will continue to crimp growth in major economies. 

As a result, projections are now for a global expansion of 2.4% this year, down from earlier forecasts of 3%. World Bank officials, in particular, see Japanese economic growth to be lower than anticipated, with contraction likely to persist in the European Union for the second straight year. Emerging economies are additionally anticipated to see a slowdown, with emphasis in both Brazilian and Indian economies. Economic growth in India is estimated to gain by 6.5% in the next fiscal year, lower than the decade average of almost 8%.

Bank officials added that although risks to global expansion are now “less skewed to the downside”, the overall global economy “remains fragile and prone to further disappointment”. As a result, “strong growth in developing countries is not guaranteed.”

Ultimately, today’s comments confirm the notion of further weakness going forward, even if it seems that indicators have been slightly more optimistic than a year ago. 

Nowotny To The Rescue

However, EURUSD bearishness seems to be minimized on the day following uplifting comments made by European Central Bank member Ewald Nowotny. The ECB policymaker noted that the recently appreciating Euro was “not a matter of major concern”, countering earlier assessments by Eurogroup head Jean Claude Juncker that the Euro ascent was “dangerously high”. Nowotny additionally noted no signs of deflation in the region, suppressing any need of a rate cut in the near term to spur inflationary pressures.

Outlook

Although minimized, EURUSD bearishness still remains intact as price action remains below key resistance at 1.3331. As a result, anticipation is high that another leg lower is in the works. Any upside potential remains in an upside penetration of the aforementioned barrier – which would open up scope for an advance on the 1.3400.