Psychology for major markets May 17th

EUR/USD – Holding in the mid-1.08s with the USD tone generally softer as US yields edge lower. Upside now favoured especially if recent evidence of European recovery gets further support.

USD/JPY – Downside risks persist on declining yield spread and threat of BoJ intervention. Move into the 140s possible if US yields hold at lower levels.

EUR/GBP - EUR/GBP dropping back from 0.860, but chance of June rate cut still priced as a 50-50 call.  Focus on CPI data next week as potentially the key driver of the rate decision.

AUD/USD – Moved above .66 supported by better China sentiment, and is testing resistance at 0.67. But more US yield declines may be required for a break higher.

EUR/CHF – New 1 year high reached at 0.9867, and further upside still possible if expectations of Eurozone growth continue to improve.

Equities – Regaining momentum after FOMC and payrolls. Risk premia are still low and growth numbers solid despite some softer data, so a further decline in yields could see a break of the highs.