OECD Slashes World Growth Forecasts & Warns Over Brexit

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In its latest update, this week the Organisation for Economic Co-Operation and Development has once again downgraded its growth forecast for 2019.

The group now projects growth of just 3.3%. This is down from the prior forecast of 3.5% in November last year. Incidentally, the November forecast itself had been a downward revision.

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High Policy Uncertainty

In its risk assessment, the OECD stated international trade disputes and a sharp slowdown in China and the eurozone as the key factors likely to weigh on growth over the year.

The update noted that the drop in growth we see now is due to these ongoing trade tensions. The OECD claimed that this is responsible for creating falling business and consumer confidence, as well as “high policy uncertainty.”

No Deal Brexit A Disaster

In the UK, the OECD notes that a no-deal Brexit would be a disaster for the domestic economy. They stated that it also threatens “sizeable negative spill-overs on growth in other countries.”

The OECD added that such an event could be a “major adverse shock in Europe and possibly elsewhere in the world, given that the United Kingdom is an important trading partner for many countries.”

Japan To Remain On Track

The forecast is therefore for the UK to grow just 0.8% in 2019, its worst growth rate since the Global Financial Crisis. They expect Germany, however, to grow even less at just 0.7%.

Over the year, the OECD now forecasts Italy, Turkey, and Argentina to each contract. It estimates that all major economies will lose momentum, except for Japan.

Laurence Boone, Chief Economist at the OECD, cautioned that the global economy is “facing increasingly serious headwinds.” He added:

“A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets,”

Technical Perspective

gbpusd

The rally in GBPUSD has seen price piercing above the 1.3292 level high but turning lower from a test of the 1.3365 level. However, with price currently carving out a large inverted head and shoulders pattern, the focus remains on an eventual break of the 1.3365 level (the neckline of the pattern) targeting a move up into next structural resistance in the 1.3650 – 1.3750 zone.

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