Psychology for major markets Dec 16

EUR/USD – EUR/USD edged up after FOMC with US yields slightly lower. Positive tone but weaker EZ PMIs suggest limited scope for gains so 1.18 top end of the range not under threat at this stage

USD/JPY – USD/JPY slipped back on general post-FOMC USD weakness, but JPY remains weak on the crosses, still hovering near all time lows against the EUR. BoJ rate hike expected this week, but unlikely to be enough to generate major JPY gains.

EUR/GBP – EUR/GBP hovering in the mid-0.87s having stabilised after the Budget. MPC speakers and weak GDP suggest a December rate cut is very likely, but this is now near fully priced. GBP supported near term by better UK PMI and mixed labour market data

AUD/USD – AUD/USD slipped back a little after weaker than expected Australian employment data but remains well supported by yield spreads and has prospects of testing the year’s highs above 0.67.

Equities – S&P 500 made new all time highs on December 12 but has slipped back since on AI uncertainty. Valuations still look very generous.