Covid Headwinds Dent Kiwi

The kiwi went offered as New Zealand locked down parts of the Waikato district south of Auckland, including the nation's fourth-largest city of Hamilton. Officials detected two community cases of Covid-19 in the region but struggled to connect them to the Auckland outbreak. The news resulted in the trimming of hawkish RBNZ bets as participants prepare for Wednesday's monetary policy decision from the Reserve Bank. The move in implied odds of a hike to the OCR was modest but added to uncertainty ahead of the this week's MPC meeting. The OIS strip now prices an ~80% chance of a 25bp hike to the OCR this week, down from Friday's ~83%.

• The emergence of two mysterious cases outside of Auckland threw officials a curveball on the day when the Cabinet convened to review the Alert Level in New Zealand's largest city. Auckland remained at Alert Level 3 but PM Ardern outlined a plan for the gradual easing of restrictions.
• Geopolitical angst surrounding the largest-ever incursion by Chinese warplanes into Taiwan's air defence zone generated a mild risk-off impulse in early trade, which dissipated without much delay. Most major FX crosses oscillated within tight ranges, as market holidays in China, South Korea and Australia limited activity in the Asia-Pac region.
• U.S. factory orders & final durable goods orders as well as comments from Fed's Bullard, ECB's de Guindos & Makhlouf, BoE's Ramsden and Norges Bank's Olsen take focus from here.