Psychology for major markets January 23rd

EUR/USD – Continuing its recovery despite Trump threats of 10% tariffs on the EU. This may be seen as less aggressive than feared and yield spreads remain supportive.

USD/JPY – Edged higher this week ahead of the BoJ meeting on general risk positive sentiment, but looks a little expensive here relative to yield spreads provided the BoJ deliver the expected rate hike.

EUR/GBP – Still biased higher as UK data weakens and market remains concerned at UK fiscal position. Increasingly looks likely to rise whether UK yields fall or not.

AUD/USD – Made new post-pandemic lows near 0.61 on general USD strength and risk aversion, but has bounced strongly and looks good long term value near current levels unless risk aversion increases significantly or tariffs on China are aggressive.

Equities – S&P 500 recovered as yields edged lower, but upside limited by high valuation and worries about trade wars.