Psychology for major markets Dec 10
EUR steady, JPY weak as FOMC awaited
EUR/USD – EUR/USD holding in the mid -1.16s awaiting the Fed rate decision on Wednesday. Risks may be slightly to the upside if the Fed eases, although the reaction will also depend on forward guidance, and there are risks of a “hawkish cut” which would be more USD supportive.
USD/JPY – USD/JPY edging higher helped by rising US yields, with EUR/JPY once again making new all time highs. Ueda comments suggesting a December hike is likely provide some JPY support, but significant recovery will likely require a turn lower in equities and/or BoJ intervention
EUR/GBP – EUR/GBP hovering in the mid-0.87s having stabilised after the Budget. MPC speakers suggest a December rate cut is very likely, but this is now near fully priced.
AUD/USD – AUD/USD rallied back above 0.66 after the dip onto the 0.64 handle with yield spreads very supportive. RBA also turning more hawkish suggests upside favoured but still vulnerable to any decline in risk sentiment.
Equities – S&P 500 holding close to all time highs with focus on FOMC. Rate cut widely expected and reasonably dovish guidance needed to trigger attest of the highs.