"The ECB did not push back against higher yields in the Euro Area, which could offer some near term support to EUR on the crosses. Should risk appetite fade, this could bolster EUR even further, as many European equity holdings are currency hedged, and therefore short EUR positions would need to be bought back as equities were sold. Once this positioning becomes clearer, we would look to sell EUR, as our medium term view on EUR has not changed."
JPY: Weakness Largely Behind Us. Neutral.
"We believe the majority of JPY weakness is likely behind us, though
USDJPY could trend slowly higher. Japan yields have been dragged higher
alongside European yields, limiting the extent of yield differentials
which could send JPY lower. The break of 125 could drive a larger move
higher, but with wage growth remaining strong, we believe that JPY is
more likely to remain range bound in the near term."
GBP: Sell on Rebounds. Neutral.
"Driven more from the USD side of the equation, we like selling GBPUSD
on rebounds. The currency pair continues to be sensitive to data. In
particular when Services PMI headline was weak, the underlying details
showed signs of strength in the labour market – however GBPUSD fell on
the day. The same is with the US side, where we watch for the hard data.
There are near-term upside risks associated with our bearish EURGBP
view given the volatility seen from the EUR side of the equation. "
