Over 2,500 key government officials as well as entrepreneurs, various organization representatives, and business leaders convened in Davos, Switzerland this week for the annual meeting of the World Economic Forum. This year, the WEF was spread across only four days and it concluded yesterday, January 25.
Though recovery has been seen, particularly in certain advanced economies, the WEF attendees agree that more needs to be done. During the WEF’s opening day, IMF Managing Director Christine Lagarde said “while the worst fears have faded, the emerging economies face new policy challenges.” IMF expects the global economy to grow at 3.6 percent this year, below its potential growth which is 4%. With uncertainty as well as recovery expected ahead, key officials of the world want to reshape the world with collaborative action, in line with this year’s WEF theme, “The Reshaping of the World: Consequences for Society, Politics and Business.”
In other news, status quo reigned in Bank of Japan, Bank of England, and the Bank of Canada as shown by these central banks’ respective data releases and policy statements last Tuesday.
Flash Manufacturing PMI and Flash Services PMI in Europe were broadly better than expected. On the other hand, China’s HSBC Flash Manufacturing PMI came in weaker than forecast and slid below the 50 level for the first time since July.
In Canada, Manufacturing Sales for November came out with its best reading in four months. Retail Sales also came out better than expected, 0.6 percent, following a 0.1 percent decline in October.
In the United States, Jobless Claims for the prior week came in lower than forecast (326,000 versus 331,000). On the other hand, December Existing Home Sales was weaker (4.87 million actual versus 4.94 forecast), with November’s reading revised down to just 4.82 million.
Gold had it tough during the first three days but price roared higher on Thursday and a follow-through move was seen on Friday, giving the yellow metal its best close since November 20. Buyers can’t celebrate yet, as there are still more wood to chop until at least $1,350.
Oil had a better week, rising over $4 and closing in on the $98 level before ending the week in mid-$96s. Buyers still need to take out the resistance built around the $98-$101 area.
EURUSD clinched a new low on Monday but the pair ended the week on a good note. EURUSD flew through the 1.3700 on mid-Friday before easing to close the week around 1.3676. We should see support pile up around 1.3600 to keep the momentum on the upside.
Most of GBPUSD’s 270-pip advance this week evaporated in front of traders’ eyes as the pair erased about 190 pips in the latter part of Friday. Recent price action suggests this pair could revisit 1.6250-1.6400 next week.
After a quiet start to the week, risk sentiment went stale on the last two days and this dragged the pair to a new 7-week low, putting a serious challenge to the multi-month advance. The 98-100 area would take a lot of heat if 102 breaks.
The Week Ahead
Monday will have little news scattered throughout the day. There will be Japan’s Trade Balance and BOK Monetary Policy Meeting Minutes; Germany’s Ifo Business Climate and Bundesbank Monthly Report; Eurogroup meetings; and US New Home Sales. Australia will celebrate Australia Day.
Tuesday will be much more packed with Australia’s CB Leading Index and NAB Business Confidence; UK Preliminary GDP; ECOFIN meetings; US Durable Goods Orders, S&P/Case-Shiller Composite-20 House Price Index and US Consumer Confidence.
Wednesday will be unusually brief yet still busy with GfK German Consumer Climate; UK Nationwide HPI; Eurozone M3 Money Supply; BOE Governor Carney’s speech; US Federal Reserve interest rate announcement and FOMC Statement.
On Thursday, New Zealand will be out early with its announcement of its Official Cash Rate and Rate Statement. Other news releases include Japan’s Retail Sales; UK’s Net Lending to Individuals; Australia’s HIA New Home Sales and Import Prices; Germany’s Unemployment Change and preliminary CPI; Spain’s Flash GDP; and US Unemployment Claims, Advance GDP, Pending Home Sales.
Friday will have a good mix of economic releases, to wit: New Zealand’s Trade Balance; RBNZ Governor Wheeler’s speech; Japan’s Household Spending, Preliminary Industrial Production, and Tokyo Core CPI; Australia PPI and Private Sector Credit; Germany’s Retail Sales; Eurozone Unemployment Rate; Canada’s GDP; US Core PCE Price Index, Employment Cost Index, Chicago PMI, Personal Spending, Personal Income, and Revised University of Michigan Consumer Sentiment.