Psychology for major markets September 20th
JPY falling back on less hawkish Ueda and better risk sentiment. Risky currencies retaining a positive tone
EUR/USD – Risk positive tone supporting EUR/USD rally with yield spreads already pointing higher, but limited scope beyond 1.12 unless we see better Eurozone data.
USD/JPY – Showing some corrective strength as US equity markets make new highs and US yields rise after the FOMC, while Ueda after the BoJ meeting are seen as less hawkish. But upside still looks limited with yield spreads still favouring JPY and likely to fall further.
EUR/GBP – Broke to new lows for the year at 0.8381, the lowest since August 2022, but struggling to generate momentum below 0.84 with GBP valuation historically high and yield spreads not moving significantly in the pound’s favour.
AUD/USD – Better risk sentiment supporting a test of the top of the year’s range at 0.6839, but better China sentiment likely required for a convincing break higher.
Equities – New highs in S&P 500 but valuations looking stretched with yields also higher