Psychology for major markets Oct 22

EUR/USD – Showing a weaker tone within the 1.1540-1.1780 range that has held this month. Some negative sentiment persisting from yesterday’s comments from ECB’s Lane highlighting Eurozone bank vulnerability to USD funding.

USD/JPY – JPY weakened on Takaichi appointment as PM, with a mild bounce on the announcement of Katayama as finance minister quickly reversed. JPY remains at extremely extended weak levels.

EUR/GBP – Weaker than expected September CPI pushed EUR/GBP back above 0.87, following soft labour market data last week. Highs of the year above 0.8760 nevertheless likely remain out of reach near term unless a November rate cut becomes a probability rather than a possibility.  

AUD/USD – Dipped to test the gently rising trend seen since April as risk sentiment dropped on concerns around Trump’s China tariffs and US bank problems, but key 0.64 support area likely to hold in the absence of more clearly risk negative news.

Equities – S&P dipped on US regional bank concerns, but still close to all time highs despite valuation concerns expressed by IMF and others. Downside risks increasing but no immediately obvious trigger to turn the trend.