KBC Market Research Desk
KBC Bank
USD sentiment had turned a bit more cautious last week. The payrolls could decide whether there was room for further profit taking. There wasn't. The payrolls were very strong and rubberstamped the Fed's assessment that no further rate cuts are needed. EUR/USD had returned to the 1.11 area, but the payrolls pushed the pair back lower in the 1.10 big figure. Still, the USD rebound wasn't exceptional given the strong payrolls. EUR/USD closed at 1.1060 (from 1.1104). USD/JPY even reversed the initial gain and finished lower on a daily basis (108.58 vs 108.76). So, the dollar performance wasn't that convincing after all.
Asian equities are taking a cautious start, underperforming the post-payrolls reaction on WS (gain of a about 1%). Japan Q3 GDP was upwardly revised to 0.4%. The prospect of the economy receiving fiscal aid next year pushed the 10-y Japanese yield back to 0.0%. The yen is still mainly driven by global risk, but this topic might be a slightly yen supportive too. USD/JPY hovers near 108.60. USD/JPY 108.24/107.89 is a key support. We put it on our radar. EUR/USD is holding near 1.1060.
Today, there are no important data. Later this week, the Fed and the ECB hold policy meetings and the UK will hold Parliamentary elections. As ever, headlines on the US-China trade talks will be closely monitored as the December 15 deadline when the US might impose new tariffs on Chinese goods is coming closer. Negotiations on policy amendments within the German coalition could be mildly euro supportive too.
Last week, the EUR/USD rebound was blocked at the 1.11 resistance area. However, the post-payrolls USD rebound was modest. The 1.0989/81 looks quite solide support. The jury is still out, but we slightly prefer to sell the USD on upticks.
Sterling was still captured in the well-established buy-on-dips pattern that dominated trading lately. The prospect of a Conservative election win this week continues investors to rush out of sterling short hedges. EUR/GBP is testing the 0.84 big figure this morning. The recent sterling move is driven market investor repositioning rather than (new) political news. For now, there is no reason to row against the sterling positive tide.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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