USD facing mixed signals

KBC Market Research Desk KBC Bank

On Friday, global (equity) markets entered calmer waters, but it didn’t provide a clear directional bias for global FX/ trading. The dollar recently failed to profit from market turmoil. The US dollar on Friday was still looking for a clear trend as sentiment improved, at least temporarily. USD/JPY hovered in a relatively tight 111.88/112.50 sideways range. EUR/USD tested the 1.16 area early in the session, but the US currency finally regained some traction as US equities rebounded and as Fed’s Evans reiterated that the Fed might have to raise the policy rate above the neutral rate as the economy continues to perform strongly. Even so, EUR/USD remained within in the established ranges. The pair finished the day at 1.1560 (from 1.1593). This morning, Asian equities fail to build on Friday’s rebound in the US, recording losses of 1%, or even slightly more. Comments from US policy makers this weekend suggest that trade relations between the US and China haven’t improved yet. The valuation of the yuan remains a source of dispute. Investors are pondering the potential impact of ongoing trade frictions on growth. For now, the impact on the USD is modest. USD/CNY trades little changed in the 6.92 area. The yen records modest gains. USD/JPY is testing the 112 big figure. EUR/USD is also little changed in the 1.1550 area. Today, US eco calendar contains the Empire manufacturing survey and retail sales. September sales are expected solid (0.6% M/M). Question is whether solid US eco data will help to restore confidence on US/global equity markets. At least for now sentiment looks still fragile. Of late, we left our ST USD positive bias and turned neutral on EUR/USD. The pair rebounded off the 1.1432 correction low. Italy remains a source of uncertainty as the country presents its budget to the EC. For now, we see no clear trigger for the EUR/USD to break out of the 1.1432/1.1815 ST range. We look out whether the dollar comes under pressure again if the correction on (US) equity markets were to resume.

Sterling lost slightly ground Friday, after a good rebound due to brexit hopes earlier last week. During the weekend, negotiations between UK’s Raab and EU’s Barnier couldn’t solve the issue of the Irish border ahead of this week’s EU summit. This failure weighs on sterling this morning. However, the damage is not excessive. EUR/GBP trades in the 0.88 area. The news might be slightly negative for sterling, but we expected sterling traders to keep a wait-and-see bias.

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.