Headlines:
- Dollar gains chipped away to start the session
- Stocks continue to stay under pressure so far today
- Oil drop looks to worsen further before it gets better
- ECB's Knot: A recession is not a foregone conclusion
- ECB's Kažimír: Rate hikes to continue despite unfavourable economic developments
- SNB total sight deposits w.e. 25 November CHF 555.4 bn vs CHF 562.1 bn prior
- UK November CBI retailing reported sales -19 vs +18 prior
- Eurozone October M3 money supply +5.1% vs +6.2% y/y expected
Markets:
- EUR leads, AUD lags on the day
- European equities lower; S&P 500 futures down 0.7%
- US 10-year yields down 2.8 bps to 3.673%
- Gold up 0.1% to $1,758.44
- WTI crude down 3.0% to $73.99
- Bitcoin down 1.6% to $16,230
The lockdown protests in China over the weekend is the main story to start the new week and that weighed on broader market sentiment. It was a classic risk-off transition from Asia to Europe with stocks lower, bond yields lower and the dollar benefiting from haven demand.
However, as we got into the session, there were more mixed flows with the euro recovering and then moving higher with the pound also paring losses against the greenback. Still, with equities keeping lower, commodity currencies remain the laggards but are off their earlier lows at least.
USD/JPY was sent lower from 138.20 to 137.50 with Treasury yields coming under pressure. But the pair is now back up to 138.20 as 10-year yields recover from around 3.63% to 3.67% now - still down by nearly 3 bps.
Meanwhile, EUR/USD moved higher from 1.0400 to 1.0496 - its highest level in five months - before holding around 1.0460 levels now. I would point to the technicals as being a strong contender for the reason for the move during the session as pointed out here.
GBP/USD also pulled higher from 1.2050 to 1.2117 before keeping around 1.2080 levels now. Then, USD/CAD also eased from 1.3460 to 1.3390 before holding around 1.3430-40 levels as oil prices also continue to stay under pressure today. WTI crude is down 3% to around $74 as China's unrest and zero-Covid policy continue to weigh on the demand outlook.
Elsewhere, AUD/USD is marked down 0.7% to 0.6700 but at least off earlier lows of 0.6665 during the day.
The underlying mood is still one that depicts a more risk-off flow in markets but the dollar is finding it tough to sustain gains with the technical elements also in play to start the new week.
