Psychology for major markets Mar 20

EUR/USD – USD generally firm as we approach the FOMC meeting. EUR/USD may edge towards a test of 1.08, but the 1.07-1.10 range for the year seems likely to hold

USD/JPY – USD/JPY still firm after the BoJ meeting despite the rate hike and the end of YCC, with the market seeing the statement as dovish, and the JPY still suffering from declining risk premia. But hard to see the case for significant USD/JPY gains even if BoJ policy is steady, so medium term risks downside.

EUR/GBP- EUR/GBP supported near 0.85, with softer UK labour market data supporting an upside bias, but more dovish tone from the BoE this week needed to generate upside progress. Long GBP positioning looks extended in CFTC data.

AUD/USD – AUD softer after RBA effectively removed the tightening bias. Further losses possible particularly if regional equity sentiment weakens.

EUR/CHF – CHF risks still on the downside as SNB remain one of the more dovish central banks, valuation is very elevated and risks sentiment is positive. Outside chance of SNB easing this week.

Equities – US markets remaining close to all time highs helped by strong corporate earnings, but vulnerable to a decline in easing expectations after this week’s FOMC