Subdued trading ahead of a busy week

KBC Market Research Desk KBC Bank

Friday's trading sentiment was initially slightly risk-off. European equities and the euro held a downward bias during a mainly technical driven trading session. Risk climate turned for the better as the US joined however. Markets took comfort in a few headlines by trade negotiators suggesting the US and China "made headway". All looks set to sign the phase 1 deal at the APEC summit in November. EMU stocks reversed intraday losses, US equities headed north. The SP 500 even set a new record high. The dollar outperformed on FX markets. EUR/USD slipped below 1.11 (1.108), USD/JPY inched higher towards 108.67.

Asian markets begin the week on decent footing in the wake of WS's fresh alltime highs. China outperforms amid trade optimism. USD/CNY declines to 7.06. In Argentina, current president Macri conceded losing the elections to opposition candidate Fernandez over the weekend. The central bank already announced tighter capital controls in the vote's aftermath. USD/ARS stopped short of closing at another record high last Friday. EUR/USD is marginally grinding higher close to but below 1.11., but struggles not to fall below 1.11. USD/JPY is holding in the 108.70 area. Yen investors are looking forward to this week's BoJ meeting.

Today's economic calendar contains only secondary data and does no justice to what will be an important week. US investors brace for the Fed, the manufacturing sector's ISM and the payrolls report. Q3 GDP growth figures are due in the EMU and the US. The backloaded agenda might keep investors sidelined for today though. EUR/USD technical picture didn't alter dramatically even after slipping below 1.11 – but holding well above 1.10. Brexit uncertainty hasn't been removed (yet?), capping the pair's upward potential. At the same time, the dollar probably won't make much headway ahead of the Fed meeting. This should give EUR/USD some downside protection.

Sterling reversed Friday's intraday losses mainly on a U-turn in sentiment. EUR/GBP closed marginally lower near 0.864 even as France voiced opposition to a three-month delay in Brexit. This morning's headlines however suggest that Macron caved in after all. The EU's draft proposal would now postpone the deadline until January 31 with the option to leave on November 30 or December 31 if both sides ratify the deal earlier. EUR/GBP barely moves, confirming our view that sterling discounted quite some positive news already. Focus now turns to early elections: will Johnson's call now get the support it needs?

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KBC Market Research Desk

KBC Bank

EUR/USD weakens as US jobs data trims Fed rate cut bets

The EUR/USD pair trades in negative territory for the third consecutive day near 1.1860 during the early European session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims data. On Friday, the attention will shift to the US Consumer Price Index inflation report.

GBP/USD bullish outlook prevails above 1.3600, UK GDP data looms

The GBP/USD pair gains ground near 1.3635, snapping the two-day losing streak during the early European session on Thursday. The preliminary reading of UK Gross Domestic Product for the fourth quarter will be closely watched later on Thursday. The UK economy is estimated to grow 0.2% QoQ in Q4, versus 0.1% in Q1.

Gold remains on the defensive below two-week top; lacks bearish conviction amid mixed cues

Gold sticks to modest intraday losses through the Asian session on Thursday, though it lacks follow-through selling and remains close to a nearly two-week high, touched the previous day. The commodity currently trades above the $5,070 level, down just over 0.20% for the day, amid mixed cues.

UK GDP set to post weak growth as markets rise bets on March rate cut

Markets will be watching closely on Thursday, when the United Kingdom’s Office for National Statistics will release the advance estimate of Q4 Gross Domestic Product. If the data land in line with consensus, the UK economy would have continued to grow at an annualised pace of 1.2%, compared with 1.3% recorded the previous year.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.