The World Economic Forum in Davos begins today with the leaders of the world set to deliver their opinions on the current economic climate. There will be many speeches over the next week all with the potential to cause volatility in the market. Today, Donald Trump and Greta Thunberg will both speak on the same stage with plenty more to look out for in the coming days.
Sajid Javid yesterday demonstrated the UK Governments plans to come out fighting when negotiations start with the EU. Chancellor Javid has said the UK plan to change the alignment with the EU going as far as to suggest they may look to negotiate with the US before the EU. From the 1st February the focus will turn entirely onto the negotiations which need to be concluded before the 31st December.
Over the next few weeks the chances of the negotiations being concluded quickly could become clear. As we have seen over the past few years any chances of certainty for businesses has resulted in an increase of sterling value.
The latest report from the IMF yesterday showed that should the UK have an orderly exit from the EU they expect the UK economy to grow faster than any Eurozone economy. The IMF believe over the next few years the potential uplift in the UK could see it outperform EU counterparts. This of course relies on trade talks going well for both sides, however if there isn’t a positive outcome the UK is likely to be the bigger loser.
Markets are preparing for the European Central Banks latest interest rate decision on Thursday. New President Christine Lagarde is set to announce a year-long rethink on the strategy that the central bank has adopted. The ECB interest rate has been at 0% for a considerable period of time whilst also pumping €100bn’s into the economy, clearly a different strategy should be considered. Lagarde has been Head of the International Monetary Fund the past few years so is well accustomed to dealing with turning economic downturn around.
Her first speech this week will be of keen interest to the market and there could be volatility depending on what is said. There aren’t any changes to the interest rate level expected but how investors receive the speech could move the markets.
To end the week, the latest PMI data for Services and Manufacturing will be released across Europe. This is a survey of executives asking their optimism for the future and how well they think the economy will perform. This could provide the end of the week with volatility as performance hasn’t been good in the EU of late, Germany only just avoided a recession at the end of last year and this release will provide a indication of the year to come.
Donald Trump despite being in Switzerland for Davos will see his impeachment trials opening argument in the Senate today. Trump has received a boost from the Senate Republican Leader Mitch McConnell who has laid out a fast-tracked timeline for the trial which should see proceedings move unprecedentedly quickly. The timeline will see key parts of the trial taking place in the early hours of the morning raising the question as to which if any witnesses are called, whilst it is also unclear as to what exact evidence the Democrat lawyers are going to bring.
Trump has a dozen lawyers who have been working on the case and released a 110-page document on his defence yesterday. The exact consequences of this trial may not be clear; however, Trump is expected to still remain President avoiding impeachment due to his senate majority. There are a few close allies who are believed to be undecided but in an election year voting against the Republican Presidential candidate may not be the best move. The US dollar has seen a huge boost under Trumps leadership mainly due to the business focus of his Presidency so it will be interesting to see how the markets respond if Trump looks like losing.