ECB, Davos, Earnings and Data in Focus

WEF Event Eyed Ahead of Trump Speech Friday

US equity markets are currently eyeing a slightly higher open on Thursday, following a fairly volatile session on Wednesday after which indices ended relatively flat.

Investors have plenty to focus on today, with the World Economic Forum in Davos grabbing much of the attention, while 26 S&P 500 companies will report fourth quarter earnings. Meanwhile we’ll also get more economic data from the US and Canada, with jobless claims and new homes sales coming from the former and retail sales the latter. This comes following a morning in which another survey in Germany showed record high business confidence in another boost to the entire regions recovery.

The WEF will undoubtedly grab investors’ attention on Thursday, with some of the world’s most important politicians and business leaders in attendance and making speeches. Naturally, it’s US President Donald Trump’s speech on Friday that is most hotly anticipated given growing concerns globally about protectionism, with many other leaders having warned against it already at the event.

Dollars Downfall Remains Intact, ECB Next

Will ECB Provide More Hawkish Guidance?

The ECB will take some attention away from Davos on Thursday, as the central bank releases its latest monetary policy statement and holds its usual post-meeting press conference. With no change in monetary policy expected, the focus will primarily be on President Mario Draghi’s press conference and particularly what the ECB plans to do once the asset purchase program expires in September.

The ECB in its December meeting minutes alluded to the fact that forward guidance could be revisited early this year and that it will need to evolve gradually, which has driven speculation that the message could become more hawkish earlier than expected. Combined with the improved economic climate in the eurozone and the increasing confidence that inflation will rise, investors are bracing themselves for warnings that bond buying will not be extended past September and even conversations around interest rate hikes next year.

EUR/USD -Euro Punches Past 1.24 After Mnuchin Comments, ECB Decision Next

With the euro having rallied strongly over the last couple of months following a brief correction after quantitative easing was last extended, I wonder how priced in a more hawkish ECB is and whether the lack of a hawkish shift today may weaken the single currency. Of course, the euro has been particularly strong against the dollar, the depreciation of which has played a major role in the move.

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Mnuchin Plays Down USD Comments After Sell-Off

US Treasury Secretary Steve Mnuchin – who’s comments on Wednesday were blamed for driving the currency lower again – played down these remarks which has failed to sustainably reverse the greenback’s declines. Mnuchin provided balance to his comments insisting that while a weaker dollar has its benefits for trade, a strong dollar has benefits in other areas and that the US isn’t focused on its levels. It seems that traders are only really interested in negative dollar news which isn’t uncommon in bearish markets.

Source – Thomson Reuters Eikon

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