KBC Market Research Desk
KBC Bank
The post New Year rebound of risky assets slowed on Friday and so did the decline of the dollar. The focus was on the US CPI, but inflation printed exactly as expected. Early in the session, the dollar didn’t go anywhere, but the US currency enjoyed a short squeeze during the US trading session. EUR/USD closed at 1.1469 (from 1.1500). USD/JPY also gained a few ticks and finished at 108.48. This morning, sentiment is spoiled by poor Chinese trade data. A simultaneous decline of both imports and exports is seen as confirming the impact of the trade war and as a sign of broader China economic weakness. Regional equities are turning south. The yen gains with USD/JPY drifting back to the low 108 area (even as Japan is closed for a holiday). The negative headlines on China are also weighing on the Aussie dollar. AUD/USD returned below the 0.72 handle. For now, the risk-off doesn’t support broader USD gains. The trade-weighted dollar (DXY) stabilizes in the mid 95 area. EUR/USD is trading near 1.1475.
EMU Nov production data are expected weak (-2.1 y/y) today, but the report is a bit outdated. In the US, the publication of several data will be delayed due to the government shutdown. The first corporate results (Citi-group) are a wildcard and so is Brexit. Since the start of the year, the dollar lost momentum as the Fed indicated a more cautious approach on further interest rate hikes. EUR/USD cleared the 1.15 resistance. Friday’s setback is a bit disappointing for USD-bears. However, we don’t expect the USD rebound to go really far unless risk sentiment would deteriorate sharply. Some ST EUR/USD consolidation might occur. MT EUR/USD 1.1621 (mid-Oct top) remains the next reference.
Sterling rebounded quite sharply on Friday, especially against a weaker euro (EUR/USD). The move was mainly technical in nature, but rumours that the UK government was considering to delay the exit beyond 29 March may also cause a repositioning out of sterling shorts. Today, UK PM May will try a last attempt to convince her party to support hear deal. However, the market focus remains on the ‘What’s next question’. The market is inclined to believe that a rejection of the deal might lead to a softer Brexit and be GBP-supportive. We think it’s too early to join this kind of sterling optimism.
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.