• USD (USDIndex 96.35) holds Mondays gains (95.40),  Stocks closed lower (Nasdaq  worst performer -1.39%) & Yields drop (10-yr 1.422%). Major FX pairs sideways into FED meeting. Omicron news weighed, first death in UK, WHO – this variant is “very high risk” but data on severity limited, & another study shows two-dose vaccines don’t lower antibodies.
• US Yields 10yr traded down to 1.416% up to 1.4216 now
• Equities – USA500 -43.00 (-0.91%) at 4668 – USA500.F trades higher at 4878.
• USOil – lost over $2.00 under $70.50 – now recovered $71.00. and trades at 71.20 
• Gold spiked to $1790, sank to $1782 and now struggles at $1788 
• FX markets – EURUSD now 1.1270, USDJPY now 113.70, & Cable back down to  1.3200, from 1.3275 yesterday . 

Overnight – JPY Industrial production, much better than expected, AUD business confidence better than expected and GBP data dump also better than expected (Earnings 4.9% vs 4.6% & 5.9% last time, Claims down nearly 50k vs 15K last time and expectations of -31k and Unemployment unchanged at 4.2%.

European Open – March 10-year Bund future is down -0.6 bp at 174.62, slightly underperforming versus Treasury futures. Yields remain at low levels though, as markets keep a weary eye on omicron developments while waiting for this week’s round of central bank meetings. The FOMC kicks off its two day session today, with an announcement due tomorrow. DAX and FTSE 100 futures are up 0.1% and 0.3% respectively. Sentiment is stabilising after virus restrictions.

Central banks will have a difficult task trying to balance inflation concerns and virus nerves although the FOMC it seems remains on course to speed up the tapering schedule. The ECB still looks dovish by comparison, even if it is set to confirm the timely end of PEPP on Thursday, which is keeping a lid on the EUR. The BoE is also expected to push back the flagged rate hike into 2022 as virus restrictions are being tightening and cable has dropped to test 1.3200. This mornings jobs news adds to the Hawks at the BOE.

Today – IEA OMR, EZ Industrial Production, US PPI

Biggest FX Mover @ (07:30 GMT) AUDCAD (-0.23%)  pair slip after 5-day rally from under 0.9000 to 0.9135. 

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Stuart Cowell

Head Market Analyst

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