Defensive Feel Drives Price Action

Market sentiment soured towards the end of a week which saw a marathon of monetary policy decisions, prompting participants to reflect on the outlook for global policy tightening. Meanwhile, the risks from the rapidly spreading Omicron coronavirus variant and simmering Sino-U.S. tensions sapped appetite for riskier assets.

• The Antipodeans led commodity-tied FX lower amid weakness in crude oil prices. Australia's Covid-19 situation provided a source of concern as NSW daily case count hit an all-time high for the second day in a row. New Zealand's ANZ Business Confidence deteriorated in December, with firms reporting troubles with freight disruptions and finding labour.
• The yen topped the G10 scoreboard as participants flocked into the traditional safe haven currency. USD/JPY extended losses after yesterday's rout, showing little in the way of immediate reaction to the BoJ monetary policy decision. Japanese policymakers kept key parameters unchanged, extended emergency aid for small firms and scaled back support for larger companies.
• Final EZ CPI, German Ifo Survey, UK retail sales & Norwegian unemployment are on today's data docket. Comments are due from Fed's Waller & ECB's Rehn.