Psychology for major markets December 19th

EUR/USD – Lost a big figure after the FOMC decision as US yields rose, but showing some resilience as yield spreads suggest decline may be overdone

USD/JPY – Still well bid on the back of rising US yields and the lack of a BoJ hike. Continuing to move with 10 year yield spreads, suggesting further gains may be harder, but little reason to expect a reversal unless equity weakness becomes more severe.

EUR/GBP – EUR/GBP dropping significantly below 0.83 as market continues to price relatively slow pace of BoE easing, but some risks of GBP falling back after the BoE meeting if the Bank suggests market pricing is too hawkish.

AUD/USD – Making another new low for the year helped by higher US yields and lower equities, although yield spreads and risk sentiment suggest scope for recovery.

Equities – S&P 500 dropped on the more hawkish FOMC and higher yields, but implied risk premia remain very low suggesting market is vulnerable to any evidence of slowing US growth.