Citi

European Open

The risk rally from the NY session paused as markets assessed the state of play. G10 FX sat in a tight range while UST yields were down, led by the front end as we wait for FOMC minutes today. Overnight, the nominations for Biden’s Fed nominees faced resistance in the Senate and Bloomberg reported that they have been delayed indefinitely. Geopolitical tensions remained top of mind with headlines from Putin’s meeting with Germany Chancellor Schulz showing there are a number of issues to be resolved. In China, we saw PPI and CPI data come in a tad light.

Looking forward, we remind that NATO ministers are set to meet from February 16-17, We also note a reference by Kyodo News that G7 is preparing for an emergency Foreign Ministers meeting in Mid-February. We therefore remain sensitive to news on geopolitical tensions in the near run. FOMC minutes will also be top of mind today at 19:00 GMT, where we will look for indications of an early end to asset purchases. The US also sees data in the form of retail Sales at 13:30 GMT.

Elsewhere, CPI data is due in GBP (07:00 GMT), CAD (13:30 GMT), and RUB (16:00 GMT). NOK will sight a GDP at 07:00 GMT and EUR a Eurozone Industrial Production at 10:00 GMT. Lastly we flag that THB is on holiday today.

In focus

USD and the focus on FOMC minutes

USD tapered lower post the European close and remained flat in the Asian session as risk appetite increased. This resumption of risk came on the back of more positive geopolitical headlines, as detailed in the next session. G10 currencies were mostly in a tight range against the dollar, while UST saw yields dip, led by the front end. Our trader Hideyuki Liu writes more below:

–Treasuries are firmer in today's Tokyo session, buoyed by buying flows and broader recovery in global bonds during the session with Australia also trading better. Desk flows have seen good buying of the long-end by RM, though price action has seen the curve bull steepen led by intermediates in continuation of the steepening move seen yesterday. After the move higher in the morning however, treasuries for the most part have flat-lined, content to trading within a range into the London open.

Geopolitical risk

Geopolitical risks remains top of mind, as tensions somewhat eased a little over the course of yesterday. We recap the happenings below

–Russia President Vladimir Putin said a number of outstanding issues are unresolved after meeting with Germany Chancellor Schulz (Bloomberg headlines

–NATO did not find evidence that Russia withdrew some of the troops it said it will bring home from the Ukrainian boarder earlier in the NY session Tuesday. “So far, we have not seen any de-escalation on the ground, not seen any signs of reduced Russian military presence on the borders of Ukraine, but we will continue to monitor, to follow closely what Russia is doing," said NATO Chief Stoltenberg.