Citi

European Open

Another quiet session in Asia, as we gear up for the week of central bank decisions. Both USD and UST yields ticked slightly higher. AUD dipped 0.3% on flows and thin liquidity. Japan saw the BOJ announce another two repo operations in what now seems clearly an effort to reverse the recent rise in repo rates as we approach year-end, although JPY was little affected by this news, trading flat on the day.

Looking ahead, USD will see NFIB Small Business Optimism Tuesday (11:00 GMT), followed by PPI (13:30 GMT). GBP will eye a jobs report (07:00 GMT), followed by BoE's Breeden and Foulger on the financial stability report (11:30 GMT). SEK will see CPI (08:30 GMT) while WUR will see Eurozone IP (10:00 GMT). The highlight will however be the central bank decisions in HUF (13:00 GMT) and CLP (21:00 GMT) where Citi Economics expect +50bps to 2.60% and +125bps to 4.00% respectively. BRL sees central bank minutes (11:00 GMT).

A lens on the US

USD ticked higher yet again in a quiet session, marked with little movements in the G10 space. UST yields edged higher as well, except for the 5yr which was flat. Our trader Hideyuki Liu summarises the session below:

–Another muted session, which traded flat most of the time. Treasuries went out near the highs in NY yesterday, but have opened softer with desk flows skewed to two-way in 10s by RM and modestly better selling in the long-end. There has been selling in the screens in 5y, which have seen the highest volumes, and the sector has underperformed on the curve.

CIBC

FX Flows

USD mildly higher against most currencies in the G10 space, small risk-off, AUD$, NZD$ lower from opening levels, Hong Kong indices weak.

EUR$ slightly lower over the morning but felt like someone lifted €AUD which kept the EUR$ up. No decent option strikes today, but for the week more than €3.3bn of 1.1300 rolls off, the big one is on Friday.

AUD$ took out the 0.7106 support, our macro strategist Patrick said it is an important level. This was former low and then resistance (broken) on the way back up. It felt like cross play when EUR$ was pushed up and AUD$ down to 0.70975. Risk sentiment also put pressure on the AUDNZD cross. Next support for the AUD$ should be 0.7060. Traders are reminded of large strike at 0.7000 this week, biggest is A$2.04bn due Friday.

The BBC News reported that at least one person in the UK has died from the omicron variant. Health Sec Sajid Javid told MPs Omicron now represented 20% of cases in England. UK Health Security Agency revealed that omicron infections running at 200k a day. Do note there is a byelection as well in North Shropshire on Thursday. Neil Shastray-Hurst, Conservative candidate, has admitted there has been anger over the alleged Christmas parties held in Whitehall and No 10 last year. Bookmakers have made the Liberal Democrats the favourites to win, according to The Guardian. If the Tory Party loses this byelection, the party could embark on a civil war with only one outcome: the replacement of its leader. GBP$ drifted little lower, overall there was not much interest.

$Yen is dull. We have been on 113-handle since start of December. Even the Japanese retail day traders are playing the range. Traded higher initially however selling of Yen-crosses in the late morning brought the USD back to square one.