Psychology for major markets Dec 19

EUR/USD – EUR/USD slipping back after a test higher to 1.18 despite weaker than expected US CPI. Still stuck in the 1.14-1.18 range for now, albeit with a mild positive tone.

USD/JPY – USD/JPY surged higher after the BoJ delivered the expected 25bp rate hike. There were no real surprises in the decision or the guidance, but the market is seeing the lack of intervention as a green light to continue the uptrend.

EUR/GBP – EUR/GBP slipped lower as the BoE only voted 5-4 to cut rates with some mildly hawkish comments. Likely stuck in the mid-0.87s until or unless there is some increase in expectations of BoE easing.

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 11 but has slipped back since on AI uncertainty. Valuations still look very generous.