KBC Market Research Desk
KBC Bank
EUR/USD lost a few ticks in the 1.12 figure yesterday, but there was no driver to support a real directional USD or euro move. Interest rate differentials widened in favour of the dollar as Bunds outperformed Treasuries, but the spread was only of second tier significance for FX trading. At the kick-off off the earnings season, Citigroup earnings printed slightly better than expected and the NY Empire manufacturing also beat consensus. Both events triggered a tentative intraday USD bid, but the dollar held within established ranges. EUR/USD closed at 1.1259 (from 1.1270). USD/JPY finished unchanged at 107.91.
This morning, Asian equities are trading mixed in thin holiday market conditions. EUR/USD (1.1260) and USD/JPY (107.95) are going nowhere. The Aussie dollar is holding well north of the 0.70 mark. The RBA continues to monitor the labour market and might cut rates further of needed, but an additional cut probably won't happen in the very near future, providing a floor for the Aussie dollar short term.
Today, the eco calendar is well filled. German ZEW investor confidence is expected to stay at rather depressed levels. US June retail sales are expected at 0.2% (headline)/0.3% (control group). This reference should be achievable and that also applies to the US production data. Also keep an eye at the NAHB housing sentiment. The data might be a marginally USD supportive. That said, we have to impression that the dollar is currently slightly more sensitive to price rather than activity data. In Europe, the approval process of the new EC commission head might also create some (euro negative?) political noise. EUR/USD drifted lower in the 1.11/1.14 range but rebounded from recent lows after Powell paving the way for a July rate cut. A rebound to the 1.13 would further ease the downside momentum. With the most important eco data before the FOMC July meeting printed, we expect little inspired trading.
End of last week, sentiment on sterling turn less negative and EUR/GBP drifted (temporarily) off the 0.90 area. However, any GBP rebound is still used to sell the UK currency as investors expect Brexit related tensions to return soon.
Today, UK labour data are expected to remain solid despite mediocre activity data of late. We don't expect today's data to improve fortunes for sterling in a profound/lasting way. The EUR/GBP EUR/GBP cross rate is still attacted to the 0.90 area.
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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