Investing.com - This week investors will be continuing to monitor U.S.-China trade negotiations for signs of progress, while the ongoing government shutdown continues to delay some key U.S. economic reports.
Investors will get an update on U.S. existing home sales and jobless claims, while U.S. markets will remain closed for a long holiday weekend on Monday.
Other key economic reports this week include figures on China’s fourth-quarter GDP growth on Monday, the latest U.K. jobs report on Tuesday and Thursday’s euro zone PMI data. Central bank meetings in the euro zone and Japan will also be in focus, though no major monetary policy changes are expected.
Brexit developments will be closely watched, with British Prime Minister Theresa May set to unveil her Plan B in parliament on Monday ahead of a Jan. 29 vote, after her initial plan was struck down by a 230-vote margin last week.
Market watchers will also be looking to the World Economic Forum in Davos, Switzerland, which kicks off on Tuesday. The forum will not be attended by U.S. President Donald Trump or representatives of his administration as a result of the government shutdown. Theresa May and French President Emmanuel Macron also won’t be in attendance.
The U.S. dollar was higher against a basket of its rivals on Friday and notched up its first weekly gain of the year amid optimism over ongoing trade talks between the U.S. and China.
Media reports on Thursday and Friday suggested both countries were considering concessions ahead of a Washington visit from Chinese Vice Premier Liu He on Jan. 30 and 31 for talks aimed at resolving the trade standoff between the world’s two largest economies.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.32% at 96.02 late Friday, for a weekly gain of 0.76%. It was the first positive week for the index since mid-December.
The pound was little changed against the dollar and the euro late Friday, with GBP/USD at 1.2880, for a weekly gain of 0.31%. EUR/GBP ended at 0.8823, down 1.11% for the week, which was the largest weekly decline since August 2018.
Bets on a second referendum vote on Britain’s EU membership supported sterling.
“The bottom line for sterling is that when the probability of second referendum rises it is positive and when the probability of hard Brexit rises it is negative so sterling crashes between the two views,” said Adam Cole, chief currency strategist at RBC Capital Markets.
Ross Hutchison, rates portfolio manager at Aberdeen Standard Investments, added that as concerns about a no-deal Brexit recede, factors such as brighter outlook for the economy and what the Bank of England will do on rates come back into play.
“I think that kind of analysis is broadly correct but that doesn’t mean there couldn’t be an accident on Brexit,” he said.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, January 21
China is to release what will be closely watched data on fourth quarter growth, as well as figures on investment and industrial production.
U.S. financial markets are to be closed on Monday for the Martin Luther King Day Holiday.
Tuesday, January 22
The U.K. is to publish its latest employment report along with data on net lending.
The ZEW Institute is to publish a report on German economic sentiment.
Canada is to report on manufacturing sales.
The U.S. is to publish data on existing home sales.
Wednesday, January 23
New Zealand is to release inflation figures.
The Bank of Japan is to announce its benchmark interest rate and publish a rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.
Canada is to publish data on retail sales.
Thursday, January 24
Australia is to release its jobs report.
The euro zone is to release data on private sector business activity.
The European Central Bank is to announce its latest monetary policy decision.
The U.S. is to publish the weekly report on initial jobless claims.
Friday, January 25
The Ifo Institute is to report on German business climate.
-- Reuters contributed to this report