Psychology for major markets Jan 15
USD still firm, JPY weak but intervention threat limiting losses
EUR/USD – Still hovering in the mid-1.16s, with USD upside progress braked a little by the Fed independence concerns, but USD still underlying strong due to positive US data.
USD/JPY – USD/JPY broke to new 18 month highs above 159 on concerns about a potential Japanese election being called in February. Risks of intervention rising but pressure remains on JPY downside.
EUR/GBP – EUR/GBP failed to extend decline below 0.8650 after stronger than expected November GDP data, with higher trade deficit weighing on the pound. Upside still seen more vulnerable longer term.
AUD/USD – AUD remains well supported by yield spreads and can continue to press higher but remains dependent on good equity sentiment.
Equities – S&P 500 made a new all time highs on January 13 and remains well supported by solid US data despite overextended valuations and heightened geopolitical risk.