USD, EUR, JPY flows: Steadier picture overnight
Stabilisation overnight after initial equity dip suggests mild corrective activity near term
The USD has gained a little ground overnight against the safer havens, with the commodity currencies net little changed as equity indices bounced from initial losses. Equities are, however, still looking soft, with no real bounce from the decline seen on Thursday. We still see a case for the JPY to advance on the crosses, with EUR/JPY still broadly following equity prices, while the relationship with equity risk premia is still pointing lower. However, there may be some slightly further technical bounce after the losses of the last few days before we see another leg lower.
There’s not much on the calendar today except for the Canadian employment report, which is unlikely to have broader implications. The rise in job losses in the US Challenger survey reported yesterday and a slightly soft jobs report from Revelio labs helped to undermine the equity market on Thursday, but neither of these provide evidence of a significant downturn. In the absence of other news risk sentiment should stabilise, which may allow a short term correction higher in riskier currencies.
