Citi

European Open

EUR, SEK continued to feel tailwinds from risk decompressing as oil prices see another impressive slide and Russia/Ukraine talks set to continue, while commodity-FX ekes out modest losses. RBA minutes offered little new information for markets to chew on, though AUD, NZD struggled given broader backdrop. WTI slipped below $100 as China domestic Covid cases continue to rise, which has contributed to the sea of red across regional equity indices. CNH slipped after a second much weaker-than-expected fix, as participants extrapolate authorities may wish to permit further weakness to support growth. PBoC then disappointed markets by keeping MLF rate unchanged (versus consensus for 10bps cut), sending NDIRS rates higher, before a string of very strong February economic releases from China saw CNH totally erase initial losses.

In focus

Sweet relief

WTI crude slipped as much as 6% to break below $100 which has helped provide another lift to risk sensitive/energy reliant SEK (+0.6%) and EUR (+0.4%) as these risk premiums continue to decompress, though they stalled ahead of key levels in EURSEK 10.50 and EURUSD 1.10.

–Russia/Ukraine: We highlight overnight Russian and Ukrainian delegations held their fourth round of negotiations via video with Financial Times reported that the talks left a fragile path to diplomacy still on the table. Ukrainian presidential advisor Mykhailo Podolyak said talks were aimed at "ceasefire, peace, immediate withdrawal of troops and security guarantee,” and are expected to continue in the coming days.

G10 In Focus

While our G10 spot desks reported light flows on the whole, they did see some profit taking on AUD topside. During overnight trade, our NY sales flagged outflows in AUD from real money accounts, which were most likely profit taking from popular EURAUD trades, which could explain today’s dynamic as EUR outperforms. However, it should be noted that our eTrading team flag EUR volumes are down near half of the 30d average.

Treasuries were relatively quiet after Monday’s fierce 14bps selloff. Treasuries slid after breaking New York session lows, giving way to some selling flows, though our Tokyo desk saw pockets of dip buying though note investors are tentative ahead of FOMC meeting. Losses gradually pared through the session.

CNH steals the show

CNH volumes surged in Asia with our eTrader Akhand Pratap Singh highlighting activity was running at more than double normal by the middle of the session, with leveraged names better sellers of CNH and corps small buyers. It’s been a volatile session with expectations of another round of stock weakness and ensuing wave of foreign outflows driving some early pressure.

–Then a second consecutive much weaker-than-expected PBoC fix (6.3760 vs est. 6.3631) sent USDCNH above 6.40 level as investors assessed the possible policy intention of allowing RMB weakness to support growth.