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FxPro Forex Analysis: Markets Settle Post Davos


There was a general increase in volatility last week across the board due to Davos and a busy economic calendar. On Friday, BOJ’s Kuroda made comments in Davos concerning the Japanese economy, saying the contrast between recovery and inflation stands out more than anywhere else and the economy is expanding moderately and will continue. It’s the second largest expansion post-war. Medium to long-term inflation expectations is expected to rise. The deflationary mindset has been more tenacious than expected. He said that the output gap is closing and that the BOJ will continue aggressive easing. Most risks, from his perspective, were external and there were some indications that wages were rising. This last comment about wages sent USDJPY lower from 109.542 to 108.360.

Bank of England Governor Mark Carney also made comments at the same event, saying 80% of the G7 recovery is led by investment and trade. The probability of adjustment in asset prices has risen. We have not fully solved too big to fail. The market will decide where asset prices should be and the financial system is unlikely to amplify asset price moves. He also said that higher capital standards would help if there was a disorderly Brexit. EURGBP moved higher from 0.87323 before his comments, to finish at 0.87798 afterwards.

UK Gross Domestic Product (QoQ) (Q4) was 0.5% v an expected 0.4%, from 0.4% previously. Gross Domestic Product (YoY) (Q4) was 1.5% v an expected 1.4%, compared to 1.7% previously. GBPUSD went to a high of 1.42853, before selling off to 1.42390 following the data release.

Canadian Consumer Price Index (MoM) (Dec) was -0.4% v an expected -0.3%, from 0.3% previously. BOC Consumer Price Index Core (YoY) (Dec) was 1.2% v an expected 1.5%, from 1.3% previously. BOC Consumer Price Index Core (MoM) (Dec) was -0.5% v an expected -0.6%, from a prior -0.1%. Consumer Price Index (YoY) (Dec) was unchanged at 1.9%, from 2.1% previously. CAD crosses can be affected by this release. USDCAD moved higher, from a low of 1.22960 to 1.23588 following the data becoming public.

US GDP Annualized (Q4) was 2.6% v an expected 3.0%, from 3.2% previously, which was revised down to 2.6%. GDP Price Index (Q4) was 2.4% v an expected 2.3%, from 2.1% previously. Durable Goods Orders Ex-Transportation was 0.6% v an expected 0.5%, from -0.1% previously, which was revised up to 0.3%. Durable Goods Orders (Dec) was 2.9% v an expected 0.8%, from 1.3% previously, which was revised up to 1.7%. USDJPY sold off from 109.298 to 109.108 after the data release.

At 18:00 GMT, Baker Hughes US Rig Count numbers were released coming in at 759. The prior number last Friday showed that there were 747 Oil rigs in operation.

EURUSD is down -0.11% overnight, trading around 1.24146.

USDJPY is up 0.17% in early session trading at around 108.774.

GBPUSD is down 0.23% to trade around 1.41299.

USDCAD is up 0.17%, trading around 1.23351.

Gold is down -0.07% in early morning trading at around $1,348.35.

WTI is up 0.12% this morning, trading around $66.22.

Major data releases for today:

At 13:30 GMT, US Personal Consumption Expenditures – Price Index (YoY) (Dec) is expected to be 1.9% from 1.8% previously. Core Personal Consumption Expenditures – Price Index (MoM) (Dec) is expected to be 0.2% from 0.1% previously. Personal Consumption Expenditures – Price Index (MoM) (Dec) is expected to come in at 0.0% from 0.2% previously. Personal Income (MoM) (Dec) is expected unchanged at 0.3%. Personal Spending (Dec) is expected at 0.4% v 0.6% previously. Core Personal Consumption Expenditures – Price Index (YoY) (Dec) is expected unchanged at 1.5%. USD crosses may be heavily traded as a result of this data.

At 15:30 GMT, US Dallas Fed Manufacturing Business Index (Jan) is expected to be released, with a number of 14.6, from 29.7 previously. Firms are asked by the Federal Reserve Bank of Dallas whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

At 21:45 GMT, New Zealand Trade Balance (MoM) (Dec) numbers will be released and are expected to be $-125M. The prior number was $-1,193M. Imports (Dec) were $5.82B previously. Trade Balance (YoY) (Dec) was $-3.444B previously. Exports (Dec) were $4.63B previously. This data can affect NZD crosses.

At 23.30 GMT, Japanese Job/Applications Ratio (Dec) is expected at 1.57 from 1.56 previously. Unemployment Rate (Dec) is expected unchanged at 2.7%. Overall Household Spending (YoY) (Dec) is expected unchanged at 1.7%. Large Retailer’s Sales (Dec) is expected at -0.6% from 1.4% prior. Retail Trade s.a. (MoM) (Dec) is expected at 0.1% from 1.9% prior. Retail Trade (YoY) (Dec) is expected at 1.8% from 2.1% previously, which has been revised up to 2.2%. JPY pairs could be moved by this data release.

Major data releases for this week:

On Tuesday at 10:00 GMT, Eurozone Gross Domestic Product QoQ and YoY for Q4 will be released.

On Wednesday at 19:00 GMT, the US Fed Interest Rate Decision and Monetary Policy Statement will be released.

On Friday at 13:30, US Nonfarm Payrolls and the Unemployment Rate for January will be released.

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