Davos Aftermath – Currency Thoughts

Davos Aftermath

January 23, 2026

Today was the last day of the annual World Economic Forum in Switzerland. While there been considerable relief that President Trump lifted his threat of a new round of sharp tariff hikes against Europe, a sour taste was left by the possibility that NATO unity has crossed a line from which it may never fully recover. There was also uneasiness over the potential near-term disruption that AI development will exert on employment.

This Friday also saw the central bank interest rates being left unchanged at the Bank of Japan (0.75%) and National Bank of Kazakhstan (18.0%). Each of those results met expectations.

• Japan‘s short-term rate had been increased 25 basis points at the prior meeting last month. While 0.75% is well below central bank rates elsewhere, for Japan such represents the high point since September 1995 and a cumulative increase of 85 basis points from the -0.10% level maintained for seven years prior to March 2024. There was one vote on the 9-person BOJ Board in favor of hiking the rate another 25 basis points to 1.0%, and Governor Ueda projected further gradual rate normalization if the economy evolves as the BOJ majority believes it will. He again indicated mounting concern about yen weakness; the 160 per dollar threshold has emerged as a credible threshold that could evoke BOJ intervention. Updated economic forecasts lifted projected Japanese GDP growth a tad but the anticipated pace remains tepid at 0.8-1.0% per year. Projected core CPI inflation that excludes only perishable food and core core CPI that also excludes energy was revised marginally higher for both fiscal 2026 and fiscal 2027.
• Kazakhstan‘s central bank rate had fallen to 14.25% in July 2024, but three large hikes done in November of that year and then March and October of 2025 lifted the interest rate to a fresh peak of 18.0% where it currently stands. Although Kazakhstani CPI inflation  slowed from 12.9% last September to 12.3% by end-2025, it’s been in double-digit territory since last March. According to today’s released statement, “Inflation continues to evolve in an environment where sustained domestic demand exceeds supply capacity. Second-round effects from the tariff reform and the liberalization of the fuel market continue to be passed through into expectations and prices. …Household inflation expectations one year ahead have increased. ..Accordingly, the base rate is highly likely to be maintained at its current level until the end of the first half of 2026.”

Financial market highlights overnight included new peaks in the prices of gold ($4970/oz) and silver $99.81/oz). Net movements of the dollar were minimal, but the major U.S. stock indices settled back somewhat in pre-open futures trading following the rally on Wednesday and Thursday. Equities also closed lower in Indonesia, India, and New Zealand, and they currently sport slight declines in France, Italy and Spain. Ten-year sovereign debt yields have fallen four basis points in France, two bps in Italy and Spain and a basis point in the United States, while holding steady in Germany and ticking a basis point up in both the U.K. and Japan.

Today also heralded the arrival of preliminary January purchasing manager survey findings from several countries. Overall economic conditions improved this month in Japan, Australia, India, Great Britain, Euroland, and Germany individually as attested by composite PMI readings above 50 in each of those cases, but the French composite score fell to a 3-month low in France of 48.6 from a 50.0 reading in November. Japan had its fastest overall growth in 23 months, and the Australian, German, British and Indian readings checked in at 7-, 3-,21-, and 2-month highs of 55.5, 52.5, 53.9 and 59.5. Inflation pressures in Germany and the U.K. appeared to quicken.

Other data reported this Friday included

• Japan’s lowest overall consumer price inflation rate (2.1%) in 46 months during December versus 2.9% in November. Core CPI slowed to a 14-month low of 2.4%, but inflation excluding energy as well as food hovered close to 3% with a 2.9% score.
• French business confidence this month stabilized at a 19-month high of 99.0 and close to its long-term average. A 42-month high in the manufacturing sector of 105.2 versus 92.6 at the end of 2024 has led the revival. France’s labor market has floundered, nonetheless, with a depressed reading of 93.1 in January versus 94.5 in December and 100.1 in mid-2024.
• The volume of British retail sales rose 0.4% in December and posted the largest year-on-year advance (2.5%) in eight months.
• New Zealand consumer price inflation of 3.1% last quarter was up from 3.0% in the third quarter of 2025 and 2.2% in the final quarter of 2024.
• Slovenia reported another sub-zero reading for consumer confidence but at -21 was its least negative in 47 months.
• December-over-December growth in Taiwanese industrial production (21.6%) was much stronger than in retail sales (0.9%).
• Icelandic producer prices climbed 1.4% on month and 5.9% on year in December.

The S&P Global-compiled U.S. composite and manufacturing sector purchasing managers indices each edged 0.1 point higher this month to 2-month highs of 52.8 and 51.9, while the service sector PMI held steady at December’s 8-month low of 52.5. Separately, the January U. Michigan/Reuters consumer sentiment index for the United States got revised 2.4 points above its preliminary estimate to a 5-month high of 56.4.

Copyright 2026, Larry Greenberg. All rights reserved.

Tags: Bank of Japan, French business confidence, January composite purchasing manager preliminary results, National Bank of Kazakhstan

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on Friday, January 23rd, 2026 at 8:14 am and is filed under New Overnight Developments Abroad – Daily Update.
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