Commodity Currencies Underperform As Omicron Spoils Mood

Caution lingered in Asia after a negative Wall Street session, in the early part of a MonPol-heavy week. Omicron remained the big theme, with the latest round of mobility curbs undermining hope for a swift economic recovery.

• Commodity currencies turned their tails in tandem with crude oil futures, as Omicron jitters outweighed an optimistic OPEC demand forecast.
• AUD was the worst performer in G10 FX space, with BBG trader sources noting that "short-term leveraged funds sold out of recently entered longs." AUD/USD probed the water under the $0.7100 mark.
• GBP traded on a softer footing after UK Health Sec Javid said that the estimated real number of daily Covid-19 infections is about 200,000, while PM Johnson refused to rule out more virus countermeasures before Christmas.
• The greenback remained the best performer among major currencies, as the conclusion of FOMC gathering drew nearer. The DXY pierced yesterday's peak and printed a fresh one-week high.
• USD/CNH traded with a bearish bias as the PBOC set the yuan reference rate in close proximity to market estimate. The fixing was interpreted as a sign of waning appetite on the PBOC's part to continue reigning in yuan strength.
• UK labour market report, Swedish CPI & U.S. PPI take focus on the data front today, with little in the way of notable central bank speak coming up.