EUR/USD holding tight range, stays north of 1.0770

KBC Market Research Desk KBC Bank

There was no obvious link between global FX (USD) trading and the developments on other markets yesterday. Initially EUR/USD held strong in the upper part half of the 1.08 figure as global sentiment improved after the oil-related sell-off earlier this week. Later, the dollar regained traction, even as equities rallied further. The move coincided with a rise in US yields, but we doubt this was a big factor as rate differentials didn't change much. Euro caution ahead of today's EU summit maybe played a role but we see the move mainly as order-driven, technical trade. EUR/USD closed at 1.0823 (from 1.0858). USD/JPY held recent very tight range to close the session at 107.75.

This morning, most Asian equity indices are trading in positive territory, but gains are modest compared to the WS rebound yesterday. Regional data were mixed (better than expected South Korean growth, but very week Japan PMI's). Still the impact on yen was very limited. The Aussie dollar declined temporary after an awful PMI release (services at 18!) but the move was reversed later on a broader USD decline. AUD/USD (0.6330) is holding recent consolidation pattern (0.6250/0.6450 area).

Today, the EMU & US preliminary PMI's and the US jobless claims are taking centre stage. The data will probably only illustrate the corona meltdown. Negative news might be slightly USD supportive, but we don't expect a big market reaction. EU leaders will again discuss a corona stimulus package. The EC made a proposal, but a political consensus on a detailed package (including the structure of funding) is unlikely. Germany decided on an additional domestic fiscal support (€10 bln). Question is whether this is a euro supportive. It only illustrates the fragmented crisis approach. EUR/USD is going nowhere. The 1.0770 support stays within reach, but hasn't been challenged of late. For now, we keep a neutral bias and don't anticipate a big break lower.

Sterling reversed part of Tuesday's sell-off yesterday as the risk-off eased and oil rebounded. EUR/GBP left behind the 0.88+ area to close the day at 0.8775. Today, the UK PMI's and the CBI data are expected to show further (steep) declines. The data probably won't be sterling supportive, but global sentiment probably will be more important for GBP trading rather than UK specific data. We keep the hypothesis that the EUR/GBP 0.8680/0.87 area should provide solid support.

Download The Full Sunrise Market Commentary Currencies

Author

KBC Market Research Desk

KBC Bank

KBC's Market Research Desk publishes a number of short-term reports.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.