JPY, AUD flows: JPY soft, AUD firm as equities move to new highs

There isn’t much on the calendar today, but with the S&P 500 trading to another new all time high yesterday in the US, the focus should be on how equity markets behave. The JPY remains under some pressure on the crosses against the positive risk background, and unless we see a reversal lower in equities, the risks remain on the JPY downside short term. There is nothing on today’s calendar to trigger such a move, so for now we would expect JPY weakness to persist.

The move to new highs in equities overnight also helped the AUD to recover after the recent softer performance following the RBA rate cut. As long as we continue to see reasonable risk appetite, the AUD should err towards the high end of the 0.64-0.66 range, but it looks hard to justify a break to the upside unless global growth picks up significantly in H2.