China's Turn Towards More Supportive Policy Stance Props Up Risk Appetite

The lack of any notable sense of worry surrounding the Omicron coronavirus variant in the RBA statement lent a modicum of support to the Australian dollar, as broader headline flow failed to provide much to write home about. The AUD tops the G10 scoreboard as we type, further supported by a mild risk-on feel, evidenced by an uptick in all three main U.S. e-mini futures. Signs of a more supportive stance of Chinese policymakers may have played a role here.

• Market sentiment has improved a tad, despite the ongoing geopolitical tension surrounding Russian troop buildup near the Ukrainian border. The leaders of the U.S. and Russia will hold a phone call on the matter today, while BBG reported that the White House is considering banking sanctions if Russia launches an offensive.
• The yen extended yesterday's losses, hitting its worst levels against the greenback this month. Subdued demand for safe haven assets worked against the JPY.
• USD/CNH operated below neutral levels, albeit by a narrow margin, in the wake of a 50bp cut to China's RRR delivered on Monday. The Securities Times reported that the PBOC will cut the relending rate for SMEs by 25bp from today. Separately, Monday's meeting of the CPC Politburo concluded with signals of an imminent easing of real estate curbs and a pledge to stabilise the economy in the coming year, while Premier Li noted that there is still room for various monetary policy tools.
• Final EZ GDP, German ZEW Survey & industrial output, U.S. & Canadian trade data take focus from here.