Psychology for major markets 13 Dec

USD firm after CPI, GBP soft after weak GDP. Central banks in focus
EUR/USD – EUR/USD got some support from a stronger ZEW index but fell back on slightly stronger US CPI. Yield spreads still suggest downside risks but expect it to hold near 1.08 ahead of the central bank meetings this week.
USD/JPY – USD/JPY tumbled lower on Ueda’s comments, but was already ripe for a decline after the yield spread moves seen in recent weeks. But the sharp dip below 142 may mark a completion of the short term correction, as reports play down the prospects of BoJ tightening. There is still scope for longer term declines as focus shifts to next week’s BoJ meeting.
EUR/GBP – EUR/GBP firmer after weaker than expected UK GDP and labour market data. Scope for the move to extend beyond 0.86 if yield spreads narrow further on the central bank meetings this week
AUD/USD – Dropping back from 0.66 as the oil price slips lower and the USD rises after US CPI. Still looks attractive versus the EUR if risk appetite stabilises.
Equities - FOMC unlikely to deliver much dovish language but less hawkish dots may be enough to support the market.