Investing.com -- EUR/USD surged more than 0.75%, amid downbeat forecasts from the International Monetary Fund on global economic growth over the next year and a widening of the U.S. trade deficit in August.
The currency pair wavered between a low of 1.1173 and a high of 1.1280, before settling at 1.1272, up 0.0085 or 0.76% on the session. The euro has now closed above 1.12 against the dollar three times in the last four sessions. In addition, the euro has also closed higher against its American in nine of the last 12 sessions since suffering a four-day losing streak in late-September. Over the last month of trading, the euro is up by more than 1% against the dollar.
EUR/USD likely gained support at 1.1086, the low from Sept. 3 and was met with resistance at 1.11460, the high from Sept. 18.
On Tuesday, the International Monetary Fund, a Washington-based organization mandated to ensure the stability of the international monetary system, slashed its global economic growth forecast for the second time in 2015. Citing weakness in China and soft commodity prices, the IMF estimated that the world's economy will grow at 3.1% this year and 3.6% in 2016. Both estimates are 0.2% below the IMF's July forecasts. In April, the IMF downgraded its 2015 forecast by 0.4% and its growth forecast for 2016 by 0.2%.
When projecting short-term growth in the U.S., the IMF estimates that its economy will grow 2.6% this year and by 2.8% in 2016. The IMF also expects growth in the euro zone to increase by 1.5% and 1.6% in 2015 and 2016 respectively. In Japan, the organization projects economic growth of 0.6% this year and a full 1.0% in 2016. The IMF also forecasts a sharp deceleration in growth among emerging markets, as commodity prices continue to plummet. In its latest forecast, the IMF cut growth in emerging markets to 4% for 2015.
"Prospects across the main countries and regions remain uneven," the IMF said in its October, 2015, World Economic Outlook. "Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow for the fifth year in a row, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries."
Separately, the U.S. trade deficit soared by 15.6% to $48.3 billion in August, amid a surge in imports from new iPhone orders. For the month, U.S. imports increased 1.2% to $233.4 billion. Exports, meanwhile, slumped to $185.1 billion in August, its lowest level since October, 2012, reflecting a weakness in foreign demand along with continuing strength in the dollar.
Elsewhere, German factory orders in August unexpectedly fell by 1.8% on the month, significantly below estimates for a 0.5% gain. The German economy is reeling following a Volkswagen (XETRA:VOWG) emissions scandal that surfaced last month, which could impact as many as 11 million automobiles throughout the world.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.68% to 95.55 on Tuesday, its lowest closing level since Sept. 20.