Psychology for major markets Sep 15
USD slightly soft as Fed easing expectations help equities to strengthen
EUR/USD – EUR/USD firm above 1.17 as market awaits Fed decision later in the week.
USD/JPY – JPY recovered on reports of an increased chance of BoJ tightening this year, but gains have been modest. Still scope for substantial JPY gains as yield spreads tighten further.
EUR/GBP – Still stuck in a 0.86-0.87 range. This will likely be hard to break ahead of the November BoE rate decision unless we see global moves in risk sentiment, but risks on the upside.
AUD/USD – Trading at the highs of the year above 0.6650 on improving yield spreads and strong global equities, with further scope to the upside if sentiment remains positive
Equities – S&P continues to hit new all time highs on the back of lower US yields, but downside scope for yields now very limited and valuation is very extended.