Psychology for major markets Feb 27
FX generally rangebound with inflaitonm data at the end of the week awaited
EUR/USD – EUR/USD retaining a mildly positive tone on the back of strong equity markets, but gains are gradual and 1.09 still represents significant resistance.
USD/JPY – USD/JPY holding above 150 with falling equity risk premia and low vol continuing to encourage JPY bears, but smaller decline than expected in January inflation helping a modest short term JPY recovery.
EUR/GBP – GBP sentiment buoyed slightly by upbeat comments from BoE governor Bailey and further PMI gains, but EUR/GBP still stuck close to 0.8550.
AUD/USD – AUD resilient despite weak employment data helped by strong global equity market performance. But downside risks remain as there is scope for the RBA to turn more dovish.
USD/CHF – CHF risks on the downside after weak CPI with risk sentiment positive and the SNB no longer selling FX reserves.
Equities – US markets remaining close to all time highs helped by strong corporate earnings, but may be vulnerable to any further decline in easing expectations. Focus on inflation data this week.