Psychology for major markets May 6

EUR/USD – Remains well supported on expectations of damage to the US from tariffs and decline in belief in US exceptionalism, but may struggle to make gains unless European data improves.

USD/JPY – Tested September 2024 lows below 140 but bounced as equities recovered. Upside nevertheless looks very limited above 145 with equities vulnerable at higher levels.

EUR/GBP – GBP has recovered some of the ground lost to the EUR on tariff concerns, but remains vulnerable to any turn lower in risk sentiment.

AUD/USD – Broke above key 0.64 level but has so far failed to build on gains. Clear break could open the way for progress into the high 0.60s.

Equities – Strong recovery after initial bloodbath on US tariff increases but high US valuations still suggest scope for further declines longer term if tariffs cause significant US growth slowdown.