Citi

European Open

EM currencies saw most of the action today, with the US set to return from holiday today. Top of the markets’ minds were yesterday’s headlines from WSJ stating that China may potentially inspect financial institutions’ ties with private firms. This, tied with inflationary concerns as a result of rising fuel prices have led to selling in the Asian equity markets. KOSPI was the most hit, trading -1.27% down, although HSI and NKY were also in the red. KRW saw its rates unchanged by the BoK, although it should be noted that Governor Lee hinted at the possibility of a hike next month. THB was the outperformer of the day, rising 1.03% over news of an easing in travel restrictions.

Looking ahead, we note a closely watched employment report for GBP (07:00 BST) and ZEW survey expectations for EUR (10:00 BST). EUR also sees a few ECB speakers starting with Villeroy (12:45 BST), followed by Lane (13:30 BST) and Elderson (14:00 BST). Fedspeak is also on the agenda, as Fed’s Clarida speaks (16:15 BST), followed by Bostic (17:30 BST), and Barkin (23:00 BST). On the EM front, we note key data releases in terms of CPI for RON (07:00 BST), CPI and IP for INR (13:00 BST), and IP for MXN (12:00 BST).

Lastly, we flag that BRL is on holiday.

G10 Focus

USD traded flat on an Asian morning characterised by concerns about global growth and escalating inflation. Movements were most notable in the EM space, with the US coming back from a holiday yesterday.

The NY session saw the USD end as an outperformer against the bulk of the G10 complex. Laggards against the greenback were sighted from a range of -0.9% to -0.1%. Outliers such as AUD were able to escape the dollar bid – aided by a combination of commodities price action alongside flow dynamics. Volumes were slimmer than usual given a partial US holiday that saw FI markets shuttered.

Commodities

Oil held steady through the Asian morning. Citi Research has revised its forecasts upwards, noting that Brent could tap $90.00. Natural gas held steady as well. Our futures trading team sees nearby technical support for November NG to $5.341 but risk of a "falling knife" developing if that support gives way.