One of the major economic events of the year takes place this week as key political and business leaders meet in the Swiss mountains. The Davos Summit will see hundreds of people speak including Theresa May and several central bank leaders from across the World. Whilst most of the speeches are not specific to individual country’s issues, there is always the opportunity for controversy and therefore volatility for exchange rates.
What to look out for?
From the perspective of Sterling, Theresa May is expected to have a meeting with US President Donald Trump. This could provide further clarification on the United States’ position on the UK after Trump previously declared they’re looking forward to signing a trade deal with the UK post Brexit.
European Commission President Jean-Claude Juncker will also be attending the talks which could provide May the opportunity for further discussions, or at least provide the EU leader with a platform to raise concerns for the UK’s prospects regarding a UK / EU trade deal.
Normally major political events like Davos have little impact on exchange rates, simply because the speeches are too high level and don’t offer enough detail to rattle markets. This year the whole event is focused around trying to help the World move forwards, with the main theme centered around “Creating a shared future in a fractured world”. From a economic perspective with global growth forecast at 4% there is optimism that this year could be economically sound.
However, there is some concern from a political perspective as leaders try to set there stalls out for direct investment. Donald Trump has no concerns with upsetting opinion by solely putting the US first in all his decisions. Should this trend start with other leaders we could see fractures starting to appear, potentially having an effect on global economic performance.
As previously mentioned I don’t see there being to much impact on exchange rates from events at Davos however, there is always potential for the unexpected.