EUR/USD cautioiusly settles above 1.13

KBC Market Research Desk KBC Bank

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.

Download The Full Sunrise Market Commentary Currencies

Author

KBC Market Research Desk

KBC Bank

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.