Psychology for major markets Jan 27
FOMC seen leaving rates unchanged, but markets concerned over threats to Fed independence.
EUR/USD – Supported by Greenland relief and weaker USD sentiment generally, though may need a fresh Trump attack on the Fed for a sustained break above 1.20.
USD/JPY – Sharp move lower may see consolidation around152 barring any shocks from the FOMC or Trump. The latter may be the bigger risk.
EUR/GBP – Moderately improved tone of recent UK data had EUR/GBP near the lower end of its recent range. Now looking for a fresh trigger.
AUD/USD – Potential for a break of 0.70 ahead of the FOMC unless CPI surprises to the downside.
Equities – S&P 500 has reversed most of its losses over the Greenland issue making further gains tougher given high valuation ahead of the FOMC.