Mixed US/EMU data cement EUR/USD stalemate

KBC Market Research Desk KBC Bank

EMU and US data were mostly mediocre yesterday and didn't provide clear directional guidance for their respective currencies. Initially it looked that the euro could slightly outperform. The EMU composite PMI rebounded modestly. ECB members were not keen to provide concrete guidance on a new TLTRO program. The US durable orders and Philly Fed business outlook also reinforced the feeling that US growth might be over its peak. At first, USD-German interest rate differentials narrowed slightly as EMU yields rose. EUR/USD came within reach of Wednesday's ST top, but a real test didn't occur. Later, a further rise in US yields restored the balance. EUR/USD closed again little changed at 1.1336. USD/JPY also held in well-known territory, closing at 110.70.

Risk sentiment in Asia initially turned more cautious overnight as investors await more concrete news from the US-China trade talks. Japan core inflation (ex fresh food 0.8% Y/Y) rose marginally, but didn't change the prospect for monetary policy or for the yen. USD/JPY is trading near 111.75. EUR/USD is also going nowhere (1.1340 area). The kiwi dollar (NZD/USD 0.6775 area) remains under pressure. The RBNZ indicated that tighter monetary conditions due to higher bank capital requirements, if necessary, might be counterbalanced by a rate cut. Today, there are no US data. In Europe the final German Q4 GDP and German IFO confidence are interesting. Several Fed governors will speak, mostly after the close of European markets. Yesterday, EUR/USD rose temporarily as the EMU PMI's were not that bad. A similar reaction is possible in case of a decent IFO. However, with several ‘global issues' issues still clouding the eco outlook, it is unlikely to kick-start a clear directional EUR/USD move. Fed members speaking the balance sheet is USD wildcard. EUR/USD rebounded off last week lows but euro sentiment 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 1.1187 is 61% retracement (2016 low/2018 top).

The sterling price action more or less followed the tone of the Brexit headlines yesterday. Sterling resilience prevailed, but initial intraday gains evaporated as the hope in a ‘quick' solution was said to be over-optimistic. EUR/GBP closed little changed at 0.8692. This morning's headlines suggested that the EU preparing for a three-month Brexit delay. Of late, markets tended to be positioned for a scenario that a no-deal Brexit could be avoided. This hope helped to put a floor for sterling, despite plenty of Brexit noise. 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.