KBC Market Research Desk
KBC Bank
After a hesitant start, EUR/USD yesterday resumed the uptrend from earlier this week. The move was both due to USD softness but at the same time also euro strength. A positive risk sentiment weighed on the dollar, but the EC recovery package also supported European assets and the euro. Technical pictures on several EU equity indices improved and intra-EMU spreads narrowed further. Eco data again had limited impact. EUR/USD ‘easily' cleared 1.1030/35 intraday resistance and closed at 1.1077. A late session US equity correction hardly helped the dollar. The TW dollar (DXY) closed at 98.38 (below the 98.65 support). USD/JPY closed marginally lower at 107.65.
This morning, Asian equities are trading mixed. Markets await a press conference of US president Trump with the US reaction to the new China security law on Hong Kong. Still equity losses, if any, are modest. The yuan (USD/CNY 7.1650) even regains a few ticks off recent lows. The dollar remains in the defensive. USD/JPY fell off a cliff, trading in the 107.15 area. EUR/USD also stays well bid and is testing the 1.11 level.
Today, the eco calendar in Europe and the US is well filled but markets probably will consider April data as outdated. We keep an eye at the EMU CPI (ahead of next week's ECB meeting) and the Chicago PMI. However, president Trump's press conference on China probably is the dominant factor for global risk sentiment. In this respect, we look out whether the USD reaction function is changing. There are tentative signs of building USD weakness. Of course, it is easier for this trend to gain momentum in a risk-on context, but we have the impression that the dollar is also profiting less from a (mild) risk-off. The short-term picture of EUR/USD improved after the break above 1.1018. A test of the end March top (1.1163) might be on the cards. Also watch for a test of downside support in the TW dollar (DXY 98.27) and in USD/JPY.
Sterling gained against a softer dollar but EUR/GBP traded stable in the upper half of the 0.90 big figure. There are few UK eco data today. EUR/GBP feels some spill-over upside pressure from the rise in EUR/USD and is testing the 0.90 barrier. We expect EUR/GBP to remain well bid. The prospect of a difficult next round of EU-UK Brexit negotiations probably won't help sterling.
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.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0700 after US data
EUR/USD stays in a consolidation phase below 1.0700 in the early American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold trades on the back foot, manages to hold above $2,300
Gold struggles to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to reverse its direction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.