Psychology for major markets May 23rd

EUR/USD – Back to the mid-1.08s after dipping on the US FOMC minutes helped by strong Eurozone PMIs. Focus on the US PMI with further relative US underperformance potentially seeing a test up to 1.09.

USD/JPY – Downside risks persist on declining yield spread and threat of BoJ intervention near 157, but JPY still soft in quiet markets as carry trades remain favoured. Move into the 140s possible if US yields hold at lower levels and volatility picks up.

EUR/GBP - EUR/GBP dropped back to test 0.85 after the stronger than expected UK April CPI, with June rate cut now seen as very improbable. Softer UK PMI helped trigger a bounce but upside limited by relative policy picture.

AUD/USD – Moved above .66 supported by better China sentiment, and tested resistance at 0.67, but knocked back by weaker regional sentiment. More US yield declines may be required for a break higher.

EUR/CHF – New 1 year high reached at 0.9915, and further upside still possible if expectations of Eurozone growth continue to improve. PMIs will be a focus.

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.