EUR/USD little changed despite progress on trade

KBC Market Research Desk KBC Bank

The dollar showed no clear trend yesterday. EUR/USD (close 1.1338) and the trade-weighted USD (DXY close at 96.45) finished little changed. USD/JPY (close 110.85) gained modest ground, mainly on yen weakness after soft comments from BOJ's Kuroda. The Fed Minutes showed Powell and Co will be patient as they try to find out whether further rate hikes are needed. The balance sheet roll-off will likely end this year. The USD lost ground before the release of the minutes, but rebounded afterward. Some investors maybe hoped for hints on possible rate cuts, but this sign didn't come, preventing further USD losses.
Overnight, Asian equities are (modestly) supported by headlines that the US and China are making good progress on a trade deal (MOU's, a list of products that China will buy to reduce the trade deficit ....). The valuation of the yuan is rumoured to be part of a deal. The yuan strengthens further (USD/CNY 6.70 area). The yen reversed earlier strength as the Japan manufacturing PMI fell into contraction territory. EUR/USD is little changed. The Aussie dollar initially gained on strong labour market data. However, the Aussie dollar nosedived later on an analyst call for rate cuts. Finally, headlines on a Chinese port blocking Austrian coal imports pushed AUD/USD back to the 0.71 area. The calendar is well filled today. EMU February PMI's are expected to stabilize near recent low levels. Are there finally signs that the worst may be over? US data include the Philly Fed business outlook, durable goods orders and existing home sales. USD traders might be alert for more signs of US eco softness after last week's poor sales & production data. Headlines on the Sino-US trade talks are a tentative euro positive, but it is counterbalanced by uncertainty on US import tariffs on autos.
EUR/USD rebounded off last week lows after some poor US data but sentiment on the euro remains fragile. Of late, we assumed progress on trade issues and better EMU data are needed for a more protracted EUR/USD comeback. There are hopeful signs on trade, but the jury is still out. EUR/USD 1.1216 marks the Nov low. EUR/USD 1.1287 is 61% retracement (2016 low/2018 top).

Sterling maintained most of Tuesday's gains yesterday. EUR/GBP hovered near the 0.87 pivot. The pair is still trading in that area even as Fitch put the UK AA credit rating on negative watch due to the potential negative impact of Brexit. Some headlines suggest progress on the backstop has been made after yesterday's meeting between PM May and EU's Juncker was labelled ‘constructive'. Of late, markets tended to be positioned for a scenario that a no-deal Brexit could be avoided. EUR/GBP 0.8621/17 is key MT support.

Download The Full Sunrise Market Commentary Currencies

Author

KBC Market Research Desk

KBC Bank

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

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 climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

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.