Psychology for major markets October 4th
USD staying fiirm, employment report likely to be supportive
EUR/USD – USD has benefited from safe haven flows on rising Middle East tension. Solid US data and a more dovish ECB tone also putting downside pressure on the EUR. Strong US employment report could trigger a break below 1.10.
USD/JPY – USD/JPY moved higher as Ueda and Ishiba comments sounded dovish, but Ishiba suggestions of easier fiscal policy have helped moderate the move. Further upside likely depends on the US employment data showing strength.
EUR/GBP – GBP corrected sharply lower on dovish comments from BoE governor Bailey. Still scope for EUR/GBP to advance to 0.85 as BoE easing profile moves towards the ECB and Fed.
AUD/USD – Coming off the highs as risk sentiment weakens on Middle East concerns, but likely to hold above early year highs unless China sentiment deteriorates again.
Equities – S&P 500 slipping back on Middle East related risk aversion and could see a bigger correction as valuations are stretched and election related uncertainty remains. Employment data awaited but unlikely to be a significant negative.