July 20th 2016: IMF Downgrades Global Growth

• This morning, markets are still absorbing the implications of yesterday’s global growth downgrade from the IMF. The report pointed the blame firmly at Brexit, while downgrading UK growth by 1%. The dollar shot higher yesterday and is holding at the highs this morning.

• Meanwhile, the USD/ JPY is standing pat.

• The pound held up relatively well despite yesterday’s growth downgrade. There was selling yesterday, but this was hedged by stronger than expected CPI, RPI and HPI.

• The euro has not been immune from selling, with losses on the EUR/ USD.

• Coming up today, we have UK average earnings index at 09.30, released alongside claimant count change and the unemployment rate.
• US crude oil inventories follow at 15.30.

Trade Idea: 

• The dollar is hitting fresh multi month highs as investors turn from the euro and pound. Given current global trends, it would be prudent to go with this flow rather than fight it.

• A good way to play this is a LOWER trade predicting that the GBP/ USD will close below 1.3000 in 14 days for a potential return of 157%.

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