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Forex Flash: Eurozone to contract by -0.5% in 2013 – Goldman Sachs

FXstreet.com (Barcelona) - “For the Euro area as a whole, we expect a continued contraction, by -0.5% in 2013, before a return to positive growth of 0.8% in 2014. Our baseline is still that the Euro area will ‘muddle through’ but remain intact. Cross-country divergence remains a key theme in this baseline scenario, however, with economic weakness especially pronounced in Spain and Italy. Meanwhile, we see growth decelerating only marginally in Germany in 2013, and forecast some overheating in the subsequent years.” notes the Economics Research Team at Goldman Sachs.

Moreover, “The ‘long grind’ we forecast for 2013 is the result of the damaging but necessary combination of continued public sector austerity and private sector deleveraging.” they add. Still, with financial conditions having eased quite substantially through enacted and prospective ECB policy, a sharper contraction has been avoided. ECB policy will aim to reduce the segmentation of financial markets further with targeted measures such as the Outright Monetary Transaction (OMT) program.

Forex Flash: Below-trend annual growth of 2.0% expected in US for 2013 – Goldman Sachs

According to the Economics Research Team at Goldman Sachs, “We expect below-trend annual growth of 2.0% in the United States in 2013 and acceleration to 2.9% in 2014. Growth should then remain slightly above that rate in 2015 and 2016. On an annualized sequential basis, we expect a rebound to 2.9% in 2013Q1 and a slowdown to 2% in 2013Q2 and Q3, before a pick-up to 2.5% in the last quarter of the year. Looking into 2014 and beyond, we expect above-trend growth at around 3%-3.5%.”
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Standard and Poor's rating services has cut Cyprus sovereign rating from CCC+ to CCC, "may default" level. The outlook is negative.
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