Nikkei Rises 1.7%, Led by Machinery, Financial Stocks
The Nikkei's 1.7% surge, driven by machinery and financial stocks, follows robust U.S. employment figures, reflecting renewed risk appetite. This uptick suggests a diminished demand for safe-haven assets like the JPY, aligning with our bearish sentiment on the currency. The overall resilience in Japanese equities amid positive external data may indicate a shift in investor confidence, making it crucial to monitor ongoing economic indicators for sustained momentum.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The WSJ's coverage aligns more closely with the upper third, sharing similar sentiments with firms like JPMorgan and ING.
How firms align
JPMorgan maintains a bullish stance on risk assets with a target of 1.10 for the EUR/USD, supporting the risk-on outlook noted in the WSJ. Contrarily, BofA's more cautious positioning at 1.04 does not align with the current market optimism.
What the data shows
Recent forecasts indicate a strengthening USD underpinned by improved labor market conditions in the U.S. Market participants should also keep an eye on wage growth data, as mentioned in our recent research at /research/us-labor-market-updates.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Nikkei rises 1.7%, indicating a shift in risk sentiment.
- 02Robust U.S. jobs data supports dollar strength.
- 03Watch for continued JPY weakness as risk appetite grows.
- 04Market focusing on upcoming U.S. economic indicators.
Market implications
Investors should monitor the 1.10 resistance level in EUR/USD as stronger sentiment drives positioning. Upcoming U.S. economic releases could further influence the dollar's trajectory, making consensus targets increasingly relevant.
Risks to this view
A reversal could occur if upcoming U.S. data fails to meet expectations, particularly if job growth slows or inflation signals weaken. Such developments could reignite safe-haven demand for the JPY.
Sentiment by currency
USD+EUR~JPY GBP~Composite USD score: +0.60
Sources & References
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