Psychology for major markets January 10th
USD at high levels, needs strong employment report to sustain them
EUR/USD – Holding near 1.03 ahead of the US employment report. Yield spreads suggest scope for recovery and USD may be vulnerable unless the data proves stronger than expected
USD/JPY – Upside limited as we approach intervention territory near 160. Strong wage data indicate increased chance of BoJ January tightening providing some JPY support
EUR/GBP – Testing above 0.84 as gilts sell off suggesting some foreign selling. Weak UK growth and fiscal position undermining confidence, and GBP is at high levels against the EUR, so scope for further declines if markets price in more aggressive BoE easing.
AUD/USD – Holding near the lows as US yields hold firm and markets remain disappointed at the lack of China stimulus and worried about upcoming impact of tariffs.
Equities – S&P 500 holding fairly steady just below the highs despite having slipped a little on rising US yields. Some vulnerability to any further rise in yields a risk premia are now very low.