Light Risk-On Flows Emerge Ahead Of FOMC Rate Decision, Offshore Yuan Whip-Saws

Light risk-on flows emerged in G10 FX space with Fed rate decision looming large, as U.S. e-mini futures lodged some gains. Activity remained limited by public holidays in several financial centres across Asia, including mainland China and Japan. When this is being typed, high-beta currencies sit atop the G10 pile, while the Swiss franc lags behind.

• New Zealand's labour market report failed to make an impression as its main parameters were narrowly mixed. The unemployment rate held steady, while participation shrank a tad and previous employment growth readings were revised lower, yet wage data remained firm. Our analysis showed that annual employment growth ended a run of upside surprises seen in the previous quarters.
• Offshore yuan's price action was fairly choppy amid holiday-thinned liquidity. Spot USD/CNH knee-jerked higher as Beijing shut over 40 metro stations. Those gains proved short-lived and the rate sank into negative territory, before gradually trimming losses.
• All eyes are on the FOMC who will conclude their monetary policy meeting today and are widely expected to tighten policy. Consensus looks for a 50bp rate hike as pressure is mounting on the Fed to contain elevated inflation.
• Today's data highlights include U.S. ADP employment change, trade balance & ISM Services Index as well as a slew of Services PMIs from across the globe.