Citi

European Open

Markets were calm ahead of a well-watched US CPI print later today. DXY grinded slightly higher while UST were slightly higher across the curve. JGB futures slid after enhanced liquidity auctions saw very weak demand metrics, pushing 10y yields to 0.22%, close again to BoJ’s 0.25% threshold. Meanwhile the RBI pulled a dovish surprise, maintaining its key rate, the reverse repo rate and giving little guidance on OMO. The markets’ expectations were for a 20bps increase in the reverse repo rate and for guidance in OMO. As a result, INR dipped slightly while IGB yields fell.

Looking ahead, although we see several rate decisions and key data, eyes will all be on the US CPI at 13:30 GMT. USD also sees Initial Jobless Claims & Continuing Claims at the same time. NOK sees a CPI at 07:00 GMT, while SEK sees a rate decision at 08:30 GMT where we eye the level of dovishness in the central bank’s messaging.

EUR sees economic forecasts at 10:00 GMT, followed by Banking Supervision press conference at 10:00 GMT and ECB speak throughout the day. BoE Governor Bailey will speak at 20:15 GMT. In the EM space, we see a slew of rate decisions starting with IDR at 07:20 GMT and HUF at 08:30 GMT where no change is expected. MXN sees a rate decision at 19:00 GMT where we expect +50bps to 6.0%. PEN similarly expects 50bps hike to 3.5 in its rate decision at 23:00 GMT. PLN and CLP sees central bank minutes.

EUR: Eurozone European Commission publishes Economic Forecasts at 10:00 GMT, followed by Banking Supervision press conference at 10:00 GMT and speak throughout the day. Citi Economics will focus on whether there is any dovish pushback in Thursday’s speak following last week’s hawkish ECB and likely inflation revisions in the economic forecasts. Philip Lane’s panel participation Thursday will be important, given he voted for a 25bp hike and leans dovish-neutral.

GBP: Bank of England Governor Andrew Bailey speaks at 20:15 GMT. Citi Economics expects Bailey to focus on the outlook for monetary policy – just like Pill is expected to do earlier in the week. Further push back against the hawkish re-pricing since February’s MPC meeting seems likely, including emphasis on the medium-term headwinds to demand.

Credit Agricole

Asia overnight

Investors’ nerves were soothed a little by the rhetoric from FOMC officials suggesting an overly aggressive rate hiking cycle was not on its way. Key hawk and voter in 2022, Loretta Mester, said that while all options were on the table for the March meeting, the was not a “compelling case” for a 50bp hike in March. Raphael Bostic, a non-voter in 2022, also said he saw three maybe four rate hikes this year. So despite a strong rally in equities, UST 10Y yields took a break from rallying and remained below the key 2% level. Strong results from Disney and Uber also helped equities. While most Asian bourses were higher, S&P500 futures were trading lower at the time of writing. G10 FX was trading in tight ranges in the Asian session and trading in line with S&P500 futures and in a risk-off fashion. The AUD and NOK were the underperformers during the session and the EUR and CHF the outperformers.