ECB Council Meeting Held, Focus on Draginaight! ~ Highlights on January 24 and Event Schedule ~
Yesterday, NZ quarterly CPI (Consumer Price Index) was released and surpassed expectations, causing NZD to rise significantly. Also in the UK, the pound rose following comments from BoE Deputy Governor Ben Broadbent. NZD and GBP were the two strong currencies.
Recently, the reports of rejection of U.S.-China trade talks, which had been a factor in stock declines and risk-off sentiment, have been denied. The denial of the denial is unclear, but there was a reversal of risk-off with yen selling. The yen weakened and approached around 110 per dollar.
◎ Today’s Points of Focus
1) ECB Governing Council
Today's ECB Governing Council was expected to pass quietly. QE is set to end in December. With forward guidance indicating rate hikes after the summer, it was anticipated that there would be no particularly significant statements.
However, some information suggests there might be references to “TLTRO” and “LTRO.” Considering the recent weakness of the European economy, there is a possibility of movement at the press conference. Before the ECB meeting, PMI data from Germany, France, and the euro area will be released. Given economic weakness and accommodative policy, the euro may react to the data with further weakness expected.
For details on “TLTRO” and “LTRO,” see below↓↓↓
“LTRO” and “TLTRO” Now ECB Easing! – FX Glossary –
2) U.S. Budget and Government Shutdown
Budgetary issues and the government shutdown have become prolonged. The shutdown period reached 33 days, with the second paycheck approaching. Naturally, salaries have not been paid.
Amidst this, Reuters reported that the Democrats are considering border wall funding. Also, the Speaker of the House has indicated he will not allow the State of the Union address to be delivered in the House unless a budget agreement is reached.
If the budget passes, a reversal of risk-off may be possible. We will be watching closely.
3) UK Parliament and the Withdrawal Agreement
Yesterday, the pound rose on comments from BoE Deputy Governor Broadbent. The current level of the pound suggests that a no-deal Brexit is unlikely. From here, extending the withdrawal deadline or reaching an agreement on the withdrawal could push the pound higher. If no-deal Brexit or strong fears arise, the pound could fall. Deliberations continue ahead of next week’s votes. Headlines are likely, so caution is warranted.
4) U.S.-China Trade Talks
Right now, the biggest factor in risk-off is U.S.-China relations. Headlines about whether talks are rejected or not reject can move risk sentiment. On the tariff front, talks seem to be progressing smoothly, but the issues lie in intellectual property and matters such as Huawei CFO. We will look for further information and progress in this area.
◎ Today’s Event Schedule
January 24 (Thursday)
Davos World Economic Forum - Annual Meeting
09:30 AUDJobs Change and Unemployment Rate
17:15 EUR France Manufacturing, Services, and Composite PMI
17:30 SEK Sweden Unemployment Rate
17:30 EUR Germany Manufacturing, Services, and Composite PMI
18:00 NOK Norges Bank Policy Rate
18:00 EUR Euro Area Manufacturing, Services, and Composite PMI
21:45 EURECB Governing Council and Policy Rate Decision
22:30 EURDraghi Press Conference
23:45 USD Manufacturing, Services, and Composite PMI
January 25 (Friday)
Davos World Economic Forum - Annual Meeting
01:00 USD Crude Oil Inventories
◎ Weekly Schedule
