EUR: EUR to Range Trade. Neutral.

Yellen’s Dovish speech has given support to EUR, pushing EURUSD through 1.14. We Expect EURUSD could trade as high as 1.16/1.17 in a weak USD environment but expect the ECB will be uncomfortable with sustained strength near these levels. Core CPI was a positive surprise this week, though this may have been driven by the timing of Easter. In general, we don’t see a catalyst for EUR weakness in the short term and expect it to range trade near these levels.

JPY: Staying Bearish Tactically. Bearish.

We remain Tactically Bearish on JPY for two reasons. First, the new fiscal year starts this week, and we expect domestic investors to hunt for yield overseas on a currency-unhedged basis. Second, the dovish Fed and stabilising China data provide support for risk appetite in the near term, which reduces the demand for safe haven assets such as JPY. In this environment, we like selling JPY against high beta currencies such as ZAR, AUD and MXN.