Psychology for major markets October 23rd

EUR/USD – USD remains firm helped by firm US yields based on expectations of Trump victory suggested by betting markets, although polls remain unclear. Also rising expectations of 50bp ECB cut undermining EUR suggesting scope towards 1.07.

USD/JPY – JPY under pressure with rising UST yields driving USD gains. Yield spreads still suggest current levels are too high and verbal intervention starting to be heard calling the recent moves one-sided, but uptrend likely to persist unless risk sentiment weakens.

EUR/GBP – GBP holding firm against the EUR despite more dovish BoE stance. Focus on October 30 budget which could trigger GBP gains as GBP still contains some risk premium from the Truss budget in 2022.

AUD/USD – Struggling against firm USD despite solid domestic fundamentals and more hawkish RBA after strong employment data. But risks on upside provided China news doesn’t deteriorate.

Equities – S&P 500 may be toppy with US yields still firm despite solid growth data with valuations stretched and risks around the US election.