Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Global presence ripples from Davos
President Trump ensured his virtual address at the World Economic Forum in Davos made waves across global markets. His discussion covered topics on trade, geopolitics, interest rates, and AI.
U.S. Treasury yields steepened amid optimism in long-end rates, while jobless claims had little effect.
The USD weakened as markets embraced a “sell the news” narrative.
The USD’s global weakness reflected multiple factors:
AUD/USD extended gains, bolstered by Trump’s Davos comments and Chinese New Year optimism.
USD/JPY softened to 156.00, with JPY buying ahead of Friday’s BoJ meeting, where a 25bps hike is expected alongside dovish guidance.
EUR/USD remains firm above 1.0400, signaling potential near-term upside with Euro Area PMI data on the radar.
We expect a 25bps hike from BoJ, but dovish signals from Governor Ueda.
The S&P 500 hit a record close of 6,118, with the Nasdaq recovering late-session losses.

EU manufacturing drag vs services resilience
Today will see the publication of the Euro Area PMIs.
In recent months, the PMI surveys have not been very good. Although it represents a dip in the manufacturing sector but a rebound in services in December, the euro area’s composite index fell below 50.0 in November and December, suggesting a contraction.
Spain has outperformed the major four, especially in services, whereas Germany and France have had more robust service sectors when compared to manufacturing.
The composite indexes for the UK and the euro area are expected to slightly increase.
EUR/USD edged up firmly above 1.04 which signals likelihood of uptick in those said indexes. Next key resistance to break is at 1.0461.

SGD policy pivot: Trade risks in focus
We give the MAS’s impending policy statement today a 55% chance of loosening FX policy.
One may argue that the MAS’s present foreign exchange policy is restrictive, particularly in light of declining core inflation.
In accordance with waning pressures on import prices and stabilizing labor market conditions, we anticipate core inflation to further decline to 1.7% year over year in December from 1.9% in November.
Given its economy’s reliance on trade, Singapore’s monetary policy is extremely susceptible to outside influences.
An increase in international tariffs may have a detrimental effect on growth and perhaps result in the S$NEER policy band being loosened.
Next key support for USD/SGD is at 1.3521 where USD buyers may look to take advantage.

Aussie, Kiwi on steady uptick
Table: seven-day rolling currency trends and trading ranges

Key global risk events
Calendar: 20 – 25 January

All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.