Psychology for major markets Oct 21
Markets mostly steady awaiting news on US CPI, tariffs and central bank meetings, JPY still weak on politics
EUR/USD – Likely to hold fairly steady in a 1.1550-1.18 range near term with US CPI on Friday, next week’s central bank meetings, and the November 1 China tariff deadline looking like the major focuses. Some negative sentiment today around ECB Lane’s comments highlighting Eurozone bank vulnerability to USD funding.
USD/JPY – JPY weaker on Takaichi appointment as PM, with a mild bounce on the announcement of Katayama as finance minister quickly reversed. JPY at extremely extended weak levels.
EUR/GBP – Signs of weakness in UK labour market data pushed EUR/GBP back above 0.87, but GBP has rallied since and the highs of the year above 0.8760 remain out of reach unless some earlier UK rate cuts get priced in or risk sentiment deteriorates markedly.
AUD/USD – Dipped to test the gently rising trend seen since April as risk sentiment dropped on concerns around Trump’s China tariffs and US bank problems, but key 0.64 support area likely to hold in the absence of more clearly risk negative news.
Equities – S&P dipped on US regional bank concerns, but still close to all time highs despite valuation concerns expressed by IMF and others. Downside risks increasing but no immediately obvious trigger to turn the trend.