China's COVID-19 Situation Weighs On Risk, Greenback Slips Ahead Of U.S. CPI

Risk sentiment soured as a worsening COVID-19 outbreak in China's manufacturing hub of Guangzhou resulted in tighter curbs across the country, dampening hopes for a sooner re-opening. Against this backdrop, participants were wary of taking more risk ahead of the release of U.S. CPI data, today's key risk event.

• Fed's Kashkari said that the Fed would do what's needed to bring inflation under control but "monetary policy acts with a lag." Today's CPI data has the potential to move the needle on Fed outlook, with analysts in a Bloomberg survey expecting headline consumer inflation to have eased to +7.9% Y/Y in October from +8.2% prior.
• The BBDXY index ground lower, giving back some of yesterday's gains. The index has now shed 0.35% from the previous day's peak and is testing session lows at typing, with U.S. Tsy yields sitting slightly lower across the curve.
• The Antipodeans went offered amid cautious mood even as USD/CNH retreated on the back of broader dollar weakness. RBA Dep Gov Bullock said that interest rates need to go up a "little bit" further but are close to the level where the Board could take time to evaluate the impact.
• USD/JPY faltered thanks to lower U.S. Tsy yields, with the latest set of comments from BoJ Gov Kuroda offering little new. The official underscored the need for continued deployment of ultra-loose monetary policy, adding that one-sided, rapid yen decline has paused for now.
• Sterling outperformed in G10 FX space, with the cable returning above the $1.1400 mark. The broader European FX bloc was generally firmer, with SEK lagging regional peers.
• Apart from U.S. inflation figures, today's data highlights include U.S. jobless claims & Norwegian CPI. There is plenty of central bank inbound, from Fed, ECB & BoE officials.