THE TAKEAWAY: [IMF sees global growth 3.3% in 2013 and 4% in 2014; US growth of 1.9% in 2013 and 3% in 2014.] > [USDJPY Neutral]
The International Monetary Fund lowered its estimated of global economic growth this year and predicted that government spending cuts will slow U.S. growth. The IMF cut global growth to 3.3 percent in 2013 from its forecast in January of 3.5 percent. The prediction of 4 percent global growth in 2014 is held unchanged. In addition, the IMF expects the US economy to expand 1.9 percent this year, which is below January estimate of 2.1 percent. Yet, the U.S. economy is improving and should expand 3 percent in 2014.
The Fund also upwardly revised its forecast for Japan, projecting 1.6 percent growth this year and 1.4 percent next year, as it said Japan’s aggressive monetary stimulus would boost economic growth. On the other hand, “The main challenge is still very much in Europe” said Olivier Blanchard, the IMF's economic counselor. The IMF said the euro zone’s economy will be even weaker than previous forecast. It expects euro-zone gross domestic product will contract by 0.3 percent this year, revised from a forecast in January of 0.1 percent drop.
USDJPY 1-minute Chart: April 16, 2013
Chart created using Marketscope 2.0– Prepared by Renee Mu
Despite IMF cutting US growth forecast and upgrading Japanese growth forecast, the USDJPY is relatively unchanged. This underscores how severe the Bank of Japan's QE program, such that investors are worry about turning bullish on the JPY on a strong IMF growth forecast. As can be seen from the 1-minute chart above, the U.S. dollar increased slightly against the Yen to 98.08 following the report release. At the time of this report was written, the USDJPY was trading higher at 98.10 yen.
--- Written by Renee Mu DailyFX Research