Dollar volatility was very limited at the start of week. The dollar initially stayed in the defensive. EUR/USD retested Friday's intraday high (around 1.1320) multiple times going into US dealings but the move lacked momentum. New (US) earnings and data (NY manufacturing index) were insufficient to sustain Friday's rally of optimism. Risky assets (equities) and oil lost modest ground, the dollar recouped some of the previous losses. EUR/USD eventually closed virtually unchanged and was able to hold on to the 1.13-barrier. USD/JPY managed a close above 112.

Asian markets are trading mostly in positive territory following a lacklustre US session. The Aussie dollar took a hit after minutes of the central bank revealed a rate cut would "likely be appropriate" if inflation does not increase and unemployment rises. AUD/USD slipped from to 0.715. EUR/USD hovers around 1.13. USD/JPY again fell just below 112.

In today's economic calendar we'll watch for the German ZEW investor sentiment to leave the sub zero area behind. Markets expect an uptick from -3.6 to 0.5. Risks are on the upside given the strong equity performance during the survey period. In the US the NAHB housing market index and March industrial data is worth watching. Investors will look for signs of (hard and soft) data to bottom out after a weaker series. We're also keeping an eye at the first set of high profile Q1 non-financial earnings. But market positioning might stay muted ahead of tomorrow's Chinese Q1 GDP (and EMU PMI's on Thursday). In a broader perspective the euro drifts further away from the 1.1177/87 support, despite a soft ECB. EUR/USD even recaptured the 1.13 level although the situation is fragile. Global economic sentiment has turned for the better recently. Last week's price actions shows the euro is still net benefiter of such circumstances. We watch for Q1 earnings/guidance, Chinese GDP and EMU PMI's to confirm that turnaround. We maintain the view that a EUR/USD break lower ST isn't evident given the Fed's wait-and-see bias unless surprisingly weak/strong EMU/US data. In case of a sustained break above 1.13, next highprofile EUR/USD resistance comes in at 1.1448.

Sterling found itself in calm waters yesterday. Talks between May and Corbyn are ongoing but little news escapes the room. EUR/GBP edged lower to around 0.862 (down from 0.865) during a predominantly technical trading session. Brexit has been postponed but the impasse remains. We see little reasons to turn more positive on the pound and assume the EUR/GBP 0.85 support area to be solid.

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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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