Psychology for major markets Apr 26

EUR/USD – Advancing above 1.07 as optimism about a relative Eurozone recovery builds after the PMIs. Firm equities help underpin positive sentiment, but yield spreads don’t suggest any major advance is likely.

USD/JPY – Making new 34 year highs after a BoJ meeting that suggested steady policy for the near future. Sharp post-BoJ dip was short lived but may have been intervention related, and intervention fears limit upside scope. US yields still the main driver of the trend.

EUR/GBP- Risk positive trading sees EUR/GBP drop back towards 0.8550. Still hard to see a break below 0.85 unless BoE proves more hawkish than expected on May 9.

AUD/USD – AUD boosted by stronger than expected Q1 CPI with RBA now not priced to cut rates this year, and generally risk positive sentiment. But softer US yields still required if AUD is to test up to 0.66.

EUR/CHF – Retreated from the 0.9849 high but stronger than expected EUR PMIs have restored a mildly positive tone.

Equities – Higher US yields have sent indices lower, but risk premia are still low and growth numbers solid, so a renewed decline in yields could see a retest of the highs.