IMF warns of slowing global growth but today is about US CPI

IMF cuts global growth forecasts, but inflation is still a risk

• IMF downgrades its outlook:  GDP growth for 2023 has been cut, driven by downgrades to larger economies.
• Markets on hold for now: US CPI will be key for sentiment in the coming days.
• USD rebound stalls: The USD rally turned lower on major forex yesterday
• Equities consolidate: European indices are marginally higher, with US futures all but flat
• Metals continue higher: In commodities, gold and silver have continued to rally this morning.

IMF warns of a “perilous combination of vulnerabilities”

The IMF has cut its predictions for global growth this year.

Having grown by 3.4% in 2022, the IMF is now expecting 2023 GDP growth to fall to 2.8%, whilst GDP growth in 2024 is expected to be 3.0%.

This is a downgrade of around -0.1%.

The downgrade comes as inflation continues to be stubbornly high, but is also affected by the banking crisis that has resulted in the failure of several US mid-tier banks and the firesale of Credit Suisse.

In the Global Financial Stability Report, the IMF warned of a “perilous combination of vulnerabilities” that were present in financial markets.

The cuts to the 2023 GDP outlook

On the plus side, the outlook for the UK has been upgraded by +0.3% (despite still being on for negative growth of -0.3% in 2023).

However, there were notable downgrades in the outlook for major economies such as Germany and Japan. Also, large emerging economies such as India and Brazil have had their outlooks downgraded.

Price stability over financial stability

However, the threat of inflation remains a significant problem.

IMF officials have noted that price stability needs to take precedence over financial stability.

This leaves announcements such as today’s US CPI very much in focus.

Markets are cautious, but with a mild positive bias 

Markets have brushed off the immediate concerns of the IMF report and are looking ahead to US CPI today.

• With that, there is a cautious feel in major forex pairs, with no significant direction to speak of.
• Elsewhere, there is a mild risk-positive bias, with European equities showing marginal gains to continue yesterday’s rally, whilst metals prices are also higher.

A key moment for US equities

The rally in US equities has just eased back in recent days. This is leaving S&P 500 futures and NASDAQ 100 futures at an important crossroads.

S&P 500 futures (SP500ft)

US futures have been more choppy in recent sessions.

This is dragging the S&P 500 futures once more back to an important test as the support of the four-week uptrend approaches.

• There is still a positive bias within what is now a five-month trading range between 3788/4208.
• The daily RSI is consistently above 50 and pushing around 60.
• Moving averages are rising

However, recent candlesticks have had very small bodies, reflecting uncertainty as the market eases back from resistance around 4170/4208. 

Trend support is around 4125, with 4096 now seen as a key higher low.

Reaction to the US CPI data today will be key.

NASDAQ 100 futures (NAS100ft)

The tech-laden NASDAQ has also just eased back in the past few sessions. 

The rally fell over at 13347 with the RSI hitting 70. 

Although near to medium-term technical signals are positive, the long lower shadows of the candles act as a warning sign.

A close under 12945 would open a deeper retracement back towards 12633 at least.

However, this would still be playing out as a correction within what is now a multi-month uptrend channel and we would still favour buying into supported weakness.

Support and resistance levels for Forex, Commodities, and Futures/Indices 

Data: MT5/IXOne

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