Credit rating agency Fitch has made some dire forecasts to global economic growth, predicting that the world GDP growth levels would drop to 8-year lows in 2020. According to the ratings agency, escalations in the US-China trade war are responsible for what it calls a significant deterioration in the global economic outlook.
Fitch also predicts that slower growth in China would prolong the present slump in manufacturing and trade, and limit the expansion of the Eurozone.
The warnings from Fitch come at a time when S&P cut the 2019 GDP forecast of the United States from 2.5% to 2.3%.
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What does this mean for the USDJPY?
The USDJPY and other USD pairs will be put to the test by several high profile data this week:
- US ISM Manufacturing PMI
- US Non-Manufacturing (Services) PMI
- Non-farm Payrolls
These data will explore the economic conditions around the manufacturing and services sectors as well as the employment situation in the US. They will also provide some insight as to what the Fed will have to work with when making future decisions about the interest rates.
The US ISM Manufacturing PMI comes up tomorrow at 1.30pm GMT. The consensus is for the figure to come in at 50.4, with a previous number of 49.1. The deviation to work with is 1.3.
Therefore, a better than expected figure which comes in at 51.7 or higher is good for the USD and should cause USDJPY to rise by about 30 pips in the first few minutes of the trade. A figure than comes in at 49.0 or lower is bad for the USD and would be good for a 30 pips drop in the USDJPY.
The larger the deviation of the actual number from the consensus figure, the greater will be the volatility.