Psychology for major markets May 1st

EUR/USD – Knocked lower by strong US Q1 employment cost index. Focus on FOMC but hard to see the market pricing in less Fed easing than currently, so downside limited despite negative sentiment.

USD/JPY – Sharp reversal on presumed BoJ intervention after a test above 160. Market will no doubt test BoJ resolve, but intervention may well mark the high. Further downside momentum still likely requires lower US yields.

EUR/GBP- Risk positive trading has seen EUR/GBP drop back to 0.8550. Still hard to see a break below 0.85 unless BoE proves more hawkish than expected on May 9.

AUD/USD – AUD boosted by stronger than expected Q1 CPI but knocked back by strong US data and higher US yields. 0.64-0.6450 still providing support.

EUR/CHF – Retreated from the 0.9849 high but stronger than expected EUR PMIs have restored a mildly positive tone. Very large short CHF positioning in the CFTC data underlines negative CHF sentiment but may also suggest positioning overdone.

Equities – Higher US yields have sent indices lower, but risk premia are still low and growth numbers solid, so a renewed decline in yields could see a retest of the highs..