Financial
market participants will be carefully watch key events this week, as a number
of major central banks, led by the European Central Bank, will decide on interest
rates and monetary policy path.
Also,
important reports will be out, most notably the Service and Manufacturing Purchasing
Managers Index released from a number of major economies, which is likely to
give some initial features about growth at the beginning of the New Year.
Euro
The
euro will most likely be affected after the European Central Bank meeting, as
the strategic review announced by Ms. Christine Lagarde at the December meeting
is expected to start.
While
interest rate is expected to remain unchanged, the review, which ends at the
end of the year, will be of interest as it examines the effectiveness of all the
monetary policy instruments adopted by ECB.
Regarding
economic data, investors will focus on the eurozone preliminary Composite PMI,
which includes the manufacturing and services, which may show a slight increase
to 51.0 from 50.9 recorded in December.
US
Dollar
Given
the absence of high-relevance economic data from the United States this week,
it is expected that the dollar will be affected by the general trend in
financial markets.
The
most important report will be the preliminary Composite PMI for the services
and manufacturing sectors for January, which may indicate a slight decline in
the pace of growth to 52.5 in January, compared to December's reading of 52.7.
Last
but not least, any developments regarding trade negotiations between the United
States and China and the situation in the Middle East may affect the dollar in
particular and the markets in general.
Pound
Sterling
This
week, the UK will release the preliminary PMI for the services and
manufacturing sectors for January, which may provide the latest update on the
health of the British economy at the beginning of 2020.
Expectations
are for an improvement, but with the contraction continuing at 49.6 in January,
compared to 49.3 recorded in December, according to analysts' expectations for
the preliminary composite PMI that includes the three sectors. Other than this
report, the pound might move according to the general market trend.
Commodities
Gold
continued to face some negative pressures after hitting a record high last
week, as the initial trade deal between the United States and China increased
risk appetite and reduced demand for safe haven assets.
The
yellow metal this week will largely depend on the important economic data
issued by major economies, as in the case of increasing concern about the
slowdown in global growth, this could give some support to the precious metal.
With
regard to crude oil, prices continued to drop with the slowdown in economic
growth in China, the largest importer of crude oil in the world, raising
concerns about fuel demand and lessening the wave of optimism that cheered
markets after signing of the phase-one trade agreement between China and the
United States.
Oil prices are
expected to be affected this week by data related to global growth, as well as
the weekly US crude stockpiles report.
