European markets are under the influence of the IMF’s warning about global growth. The bank has trimmed its global growth outlook, but mentioned that the world economy will strengthen in 2020 to 3.3% from 2.9%. Meanwhile, Market participants are also disappointed about the Bank of Japan’s monetary policy decision which remains unchanged.
For now, the focus is on the World Economic Forum’s annual meeting in Davos. Ahead of the World Economic Forum’s annual meeting, traders have developed a broad risk-off move and this has led a rally in safe havens such as US Treasuries and the yen.
President Trump has shown a soft side by agreeing to a truce between the US and France over their dispute about digital taxes. Both countries have decided not to impose punitive tariffs this year. However, the current tone has started to defuse transatlantic tensions which could always trigger another trade war. If a trade war breaks out between the US and Europe, the consequence could be a lot more profound because Europe is a much larger trading partner with the US as compared to China.
The bank’s monetary policy decision is due next week. The forecast for the average earning index is for 3.1% against the previous rating of 3.2% and the claimant count change is expected to print 33.4K. Only a substantial change in the unemployment picture could trigger an interest rate cut. Later on, German ZEW economic sentiment and the forecast is for 15.2 while the previous reading came in at 10.7.
Oil rally fades as investors started to factor in the reality of supply and demand. Libyan oil production makes a very small part of global oil supply, and the issue is with demand rather than supply.