Psychology for major markets Sep 16
USD soft, EUR firm as Fed easing expectations maintain USD weakness
EUR/USD – EUR/USD firms further above 1.18, threatening the year’s high of 1.1830 as market awaits Fed decision later in the week.
USD/JPY – JPY recovered on reports of an increased chance of BoJ tightening this year, but gains have been modest. Still scope for substantial JPY gains as yield spreads tighten further, but still rangebound for now.
EUR/GBP – Still stuck in a 0.86-0.87 range. This will likely be hard to break ahead of the November BoE rate decision unless we see global moves in risk sentiment, but risks on the upside.
AUD/USD – Trading at the highs of the year above 0.6650 on improving yield spreads and strong global equities, with further scope to the upside if sentiment remains positive
Equities – S&P continues to hit new all time highs on the back of lower US yields, but downside scope for yields now very limited and valuation is very extended.