Psychology for major markets December 20th

EUR/USD – Lost a big figure after the FOMC decision as US yields rose, but showing some resilience as yield spreads suggest decline may be overdone

USD/JPY – Still well bid on the back of rising US yields and the lack of a BoJ hike. Continuing to move with 10 year yield spreads, suggesting further gains may be harder, but little reason to expect a reversal unless equity weakness becomes more severe.

EUR/GBP – EUR/GBP back above 0.83 as BoE MPC gives a downbeat UK economic assessment and 3 members vote for a rate cut. Risks on the upside with more scope for UK yields to fall

AUD/USD – Holding near the lows of the year as US yields hold firm and equity markets weaken.

Equities – S&P 500 dropped on the more hawkish FOMC and higher yields, but implied risk premia remain very low suggesting market is vulnerable to any evidence of slowing US growth.