Psychology for major markets January 14th

EUR/USD – Bouncing modestly helped by slightly lower US yields and firmer equities. Sentiment remains weak but yield spreads point higher.

USD/JPY – Upside limited as we approach intervention territory near 160. Increasing expectations of BoJ tightening in January also JPY supportive, but weaker equity tone likely needed to trigger significant JPY gains.

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 – Made new post-pandemic lows near 0.61 on general USD strength and risk aversion, but has bounced strongly and looks good long term value enar current levels unless risk aversion increases significantly

Equities – S&P 500 has slipped back as yields rose post-US employment report. Equities remain very highly valued and vulnerable to any further yield rises, but hard for yields to rise much further at this stage with just one Fed rate cut priced for 2025.