Credit Agricole

Asia overnight

The spread of the omicron variant as well as the shelving of President Joe Biden’s Build Back Better bill weighed on sentiment in the Asian session. The UK has not ruled out stricter lockdown measures ahead of Christmas, and the Netherlands has gone back into lockdown; both countries are struggling to control the spread of the omicron variant. US Senator Joe Manchin has said that he will not vote for Biden’s Build Back Better bill, which robs the Democrats of a critical vote needed to get the bill through the Senate. Asian bourses as well as S&P 500 futures were trading lower at the time of writing. In G10 FX, the JPY and EUR were the outperformers in the Asian session while the NOK and NZD were the underperformers, the former being weighed down by falling oil prices.

CIBC

FX Flows

New Zealand November trade improved for the month but the annual deficit widened to NZ$6bn from -NZ$4.9bn, widest since February 2019. No immediate reaction to NZD$, took a while to move lower as US e-minis go negative. The selloff prior to Tokyo open got the Kiwi down to 0.6726.

Demand for Tokyo fix saw the $YEN bounced off the low 113.50 to 113.63. A spike to 113.70 following the PBoC cutting 1-year LPR, negative risk sentiment has pushed the pair back. There are quite a few 115.00 strikes due this week, interesting to know if they are magnetic.

The move in AUD$ below 0.7125 was pretty quick, I believed a macro account behind the price action. AUD$ has bounced off 0.7109 but remains heavy at 0.7125. There are decent option strikes maturing today, A$685mio at 0.7100, A$550mio at 0.7200 and A$1.24bn of 0.7205 calls.

$CAD higher but obstacles seen above 1.2900, probably profit taking. There are option strikes at figure but no biggie. I also believe commodity futures lending support to the Loonie. Our strategists and economists are bullish $CAD, this was one of Bipan’s call for 2022 trade ideas. There should be digital options at 1.3000.

It was a terrible week for PM Boris Johnson, Tory MPs rebelled, losing North Shropshire byelection and Brexit Minister Frost, his closest ally quit. Johnson is now caught between huge new variant cases and Covid restrictions over Christmas. GBP$ moved down to 1.3223, I heard option-type of offers are picked up near 1.3250.

Citi

European Open

A risk off mood was prevalent through the markets today. This was a combination of dented risk appetite after U.S. Senator Joe Manchin told Fox News Sunday program he cannot vote for President Joe Biden’s roughly USD2tn spending package, as well as Omicron fears in Europe. The two themes were prevalent across all asset classes, with Oil down sharply, S&P eminis and Nasdaq 100 eminis seeing 1% declines, and high beta currencies NOK, NZD and AUD leading the drops in G10. The day also saw a cut in the loan prime rate of China down to 3.80% (prior 3.85%).We have a light day of events today, as Christmas approaches.