Psychology for major markets Apr 17
Rising US yields and geopolitical tension supporting USD and undermining risk sentiment
EUR/USD – Stabilising in the mid-1.06s helped by recovering risk appetite, but sentiment still negative with market seeing widening yield differentials.
USD/JPY – Positive sentiment resumed after a break to new 34 year highs following the US CPI data and an absence of Japanese intervention. But still little support for gains in current yield spreads, and intervention still possible if JPY weakens on crosses.
EUR/GBP- Testing support at 0.8530 as risk sentiment recovers. Slightly stronger than expected earnings and CPI data have put GBP on the front foot, but with hawkish Bank of England now priced into the market, it will be difficult to break below 0.85 without some hawkish BoE commentary.
AUD/USD – AUD breaking lower as equities decline on geopolitical tension and rising US yields. October lows below 0.63 will now be targeted if equities remain under pressure.
EUR/CHF – Retreating from the 0.9849 high as EUR shows general weakness and market looks for ECB easing, with safe haven status also CHF positive given Middle East tension, but support below 0.97.
Equities – Starting to look like we may have seen the top, as geopolitical tension and rising US yields have produced three weeks of declines in the S&P. Return of expectation of Fed summer rate cuts needed to restore stability.