Psychology for major markets Oct 07
JPY stays lower after the election of Takaichi as new LDP leader and PM. EUR down on French PM resignation and weak German orders
EUR/USD – Dropped below 1.17 on French PM resignation with further downside potential if it leads to a French election. Weak German orders data also contributed to a softer EUR tone.
USD/JPY – USD/JPY sharply higher on the election of Takaichi as new LDP leader and PM. Gains look excessive as it remains unclear whether BoJ policy will be affected, and yield spreads still suggest substantial USD/JPY downside risk.
EUR/GBP – Dipped on French PM resignation. Year’s highs at 0.8763 now look out of reach near term, with 0.86-0.87 range likely to be restored.
AUD/USD – Still within mild uptrend since April despite firmer USD, with slightly less dovish RBA supportive, but vulnerable if there is a significant downturn in risk sentiment.
Equities – S&P still making new all time highs helped by dip in US yields but extended valuations mean main risks are on the downside.