Psychology for major markets 12 Dec (Europe)

EUR/USD – EUR/USD getting some support from a stronger ZEW index but focus on US CPI. Yield spreads still suggests downside risks but unless CPI is above expectations expect it to hold near 1.08 ahead of the central bank meetings this week.

USD/JPY – USD/JPY tumbled lower on Ueda’s comments, but was already ripe for a decline after the yield spread moves seen in recent weeks. But the sharp dip below 142 may mark a completion of the short term correction, although there is still scope for longer term declines.

EUR/GBP – EUR/GBP firmer after weaker than expected UK labour market data. Scope for a move above 0.86 if yield spreads narrow further on the central bank meetings this week

AUD/USD – Holding close to 0.66 but will be sensitive to the US data and central bank tone this week. AUD still looks attractive against the EUR if risk appetite hold up.

Equities – Slightly stronger than expected payroll details leave cautious tone intact ahead of Tuesday's CPI and Wednesday's FOMC meeting. We do not expect these key events to significantly undermine the market.