Japanese Yen, Gold Prices May Retreat on Davos Forum

World Economic Forum, US Dollar, Japanese Yen, Crude Oil, Gold Prices – TALKING POINTS

• US Dollar, gold prices, JPY may retreat on Davos Forum, global outlook
• IMF assessment of world growth underscores political risks as key threat
• Market mood could also be buoyed by ECB rate decision, economic data

World Economic Forum

Commodity-linked currencies like the Australian and New Zealand Dollars may climb higher with equities if commentary from officials at the World Economic Forum in Davos, Switzerland strike an optimistic tone. However, the recent outbreak of the coronavirus appears to have sapped market mood and caused the Hang Seng Index to decline almost three percent t which bled into Wall Street and dragged the S&P 500 lower.

IMF World Economic Outlook

The IMF released its World Economic Outlook (WEO) with estimates of a 3.3 percent growth rate for 2020, a slight downgrade from the prior forecasts. The lender of last resort noted that global growth appears to be showing signs of stabilization but warned that geopolitical risks could derail the modest recovery. Some of these risks included US-Iran tensions and the uncertainty relating to global trade policies.

EU-US Trade War Update

French President Emmanuel Macron and his US counterpart Donald Trump recently agreed to a trade truce following a rise in tensions over the former’s proposed digital tax bill. Washington subsequently threatened retaliatory tariffs with Paris vowing to do the same. However, the temporary détente puts EU-US trade tensions on the back-burner until year-end, which puts an even bigger premium on the 2020 US presidential election.

Critical Economic Data

In addition to the recent publication of better-than-expected German ZEW data – as forecasted – markets may also cheer the release of other reports ahead. A cascade of industrial statistics will be published towards the end of the week, which – according to the IMF’s own analysis – should begin to show signs of improvement. However, weakness there could pressure sentiment-linked assets and push JPY and gold prices higher.

JAPANESE YEN TRADING RESOURCES

• Tune into Dimitri Zabelin’s webinar outlining geopolitical risks affecting markets in the week ahead !
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

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