CIBC

Key Headlines

  • Leaders of UK, US, Italy, France and Germany spoke about Ukraine, called on Russia to de-escalate Ukraine tensions. Biden Admin said President is mulling options like banking sanctions and restrictions on trading of Russia debt if Putin decides to invade Ukraine.
  • President Biden to hold call with Putin at 10.00 am ET
  • RBA cash rate target unchanged at 0.10%, words were slightly more upbeat, AUD$ trended higher.

FX Flows

Good risk appetite continued to roll through Asia, Chinese property and real estate shares opened strong this morning. China Evergrande shares popped on news that the firm plans to set-up risk management committee. Kaisa shares up after bondholders made formal forbearance proposal to avoid default by the developer. Security Times said the PBoC to cut relending rate for SMEs by 25 bps; relending rate cut to take effect from December 7. Still, Shanghai and Shenzhen indices underperformed, managed to recover into black in the late morning.

Better risk sentiment saw Yen-crosses firmer. AUD¥ climbed back onto 80-handle, however it felt like some people were trying to pick the top.

AUD$ ended the morning right where North America closed, 0.7050s. Some people have been playing close attention to the 50-day and 100-day moving averages, about to cut the downside. RBA cash rate target unchanged, board said will consider bond purchase program at the February meeting. Words were slightly more upbeat on growth and wages. AUD$ rose to 0.7064 but looked like AUDNZD found resistance at 1.0460. Yield spread of the AU-NZ bonds widened to 138 bps.

Citi

European Open

USD ticked lower slightly while AUD rallied 0.45% during Asian trading as the RBA decision had hints of hawkishness, although the cash rate and asset purchase programs were maintained. Aussie 3yr bonds extended losses following the decision. News defined the day, as Bloomberg reported a similar story (previously stated by CNN) about potential sanctions on Russia meant to deter any potential Ukraine action. We also saw further news from China about potential cuts to its relending rate, following the Securities Times’ report early in the trading session today that the PBOC may cut the Loan Prime Rate in the near future. Chinese trade balance figures that came in a little narrower than expectations, on the back of a larger import growth as compared to export growth, took a backseat with CNH trading flat on the news.

EUR will see several data prints today, in the form of German IP (07:00 GMT), French CA (07:45 GMT) and ZEW expectations (10:00 GMT), with our eyes on the ZEW survey amid Omicron risks. Over in the EM space, we will sight RON GDP (07:00 GMT), CZK Industrial output (08:00 GMT), TWD CPI and trade balance (08:00 GMT), CLP CPI (11:00 GMT) and trade balance (11:30 GMT).