Psychology for major markets January 31st

EUR/USD – Dropping back below 1.04 as CPI data comes in soft, but downside likely to be modest as ECB stance unlikely to change much as long as European equities continue to perform solidly.

USD/JPY – JPY firm as yield spreads continue to move in the JPY’s favour.

EUR/GBP – GBP edging higher as EUR weakens but upside looks very limited with UK growth unlikely to significantly outperform, a danger of easier BoE policy than anticipated and GBP trading at expensive levels against the EUR.

AUD/USD – Made new post-pandemic lows near 0.61 on general USD strength and risk aversion. Looks good long term value near current levels, but may be held back by risk aversion near term.

Equities – Dipping on tech sector concerns as AI profitability looks threatened by Chinese competition. High valuations mean there is scope for a large correction, with tariffs also potentially a concern.