Investors appeared to be biting their nails ahead of U.S. President Trump’s speech in the World Economic Forum, which delivered on major announcements and big market moves.
The S&P 500 index surged to a fresh record high while WTI crude oil tumbled sharply to close nearly 2% in the red.
Here are the latest headlines and how financial assets performed:
Headlines:
- New Zealand visitor arrivals recovered 1.0% month-on-month in November after staying flat in the previous month
- Japan’s trade deficit narrowed from 0.39T JPY to 0.03T JPY (-0.51T JPY forecast) as exports hit record high
- U.K. CBI industrial order expectations index improved slightly from -40 to -34 (-35 forecast) in January
- Canada’s headline retail sales stayed flat (0.2% m/m forecast, 0.6% previous) in Dec; core retail sales fell 0.7% m/m (+0.1% forecast, -0.1% previous)
- U.S. initial jobless claims at 223K (221K forecast, 217K previous)
- Eurozone consumer confidence index improved from -15 to -14 as expected in Dec
- EIA crude oil inventories fell 1.0M barrels (-0.1M expected, -2.0M previous)
- U.S. President Trump talked about pressuring the OPEC+ to increase production and reiterated tariffs for Mexico and Canada by Feb
- Trump signed an executive order for a committee to look into establishing a national digital asset reserve
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Markets waited nervously for U.S. President Trump’s speech during the World Economic Forum in Davos, moving mostly sideways with a slight risk-off tilt during the Asian and London sessions.
WTI crude oil found a bit of support from a larger than expected decline in EIA crude oil inventories but eventually tumbled sharply when Trump talked about ending the Russia-Ukraine conflict by lowering oil prices.
Treasury yields, which were previously edging higher, returned some gains after Trump mentioned pressuring the Fed to lower interest rates further. Gold, which had given back some of its winnings on improving risk appetite, picked up some gains on resulting USD weakness.
On the flip side, bitcoin popped higher to the $106K area when Trump signed an executive order for a committee to look into the idea of establishing a national digital asset stockpile. U.S. equities also cheered Trump’s announcements, with the S&P 500 index soaring to fresh record highs and the Nasdaq also closing at its highest level since mid-December.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The dollar exhibited choppy trading patterns throughout the Asian session as traders positioned themselves ahead of Trump’s WEF speech. While USD managed to gather some strength at the London open, this momentum proved temporary.
A broader dollar selloff emerged following Trump’s remarks about pressuring the Fed for further rate cuts, with the decline persisting even though U.S. initial jobless claims met expectations. The currency’s weakness was particularly pronounced against the British pound and Australian dollar, falling 0.31% and 0.27% respectively.
USD/JPY showed notable weakness, dropping 0.20% as the pair responded to both domestic factors and positioning ahead of today’s BOJ decision. The Swiss franc proved most resilient among major currencies, with USD/CHF closing nearly flat at +0.03%.
The Canadian dollar demonstrated relative stability despite Trump’s reiterated commitment to implement tariffs on February 1 and weak retail sales data, with USD/CAD declining just 0.03%, suggesting markets had largely priced in this policy stance.
Upcoming Potential Catalysts on the Economic Calendar:
- Bank of Japan monetary policy decision coming up
- French flash manufacturing and services PMI at 8:15 am GMT
- German flash manufacturing and services PMI at 8:30 am GMT
- Eurozone flash manufacturing and services PMI at 9:00 am GMT
- U.K. flash manufacturing and services PMI at 9:30 am GMT
- ECB head Lagarde’s speech at 10:00 am GMT
- U.S. flash manufacturing and services PMI at 2:45 pm GMT
- U.S. existing home sales at 3:00 pm GMT
- U.S. UoM revised consumer sentiment index at 3:00 pm GMT
Volatility is expected to pick up among yen pairs today, as the BOJ will announce its interest rate decision and give a press conference sometime during the Asian trading session.
After that, the spotlight will turn to global flash PMI readings, with the eurozone, U.K. and U.S. gearing up to print results for January.
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