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.

OANDA fxTrade Advanced Charting Platform

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

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.