Risk-Off Impulse Lingers On But Moderates, EUR/USD Flirts With Parity

Participants were reluctant to take more risk ahead of this week's company earnings reports & U.S. CPI data. Overnight headline flow did not provide much in the way of fresh insights, failing to assuage familiar fears related to China's COVID-19 situation and other well-documented headwinds to global growth. That said, initial risk-off impetus moderated as the session progressed.

• The yen still sits atop the G10 pile, with other traditional safe havens (USD, CHF) also showing strength. USD/JPY slipped into the Tokyo open and extended losses to Y137.03, before trimming initial losses.
• The dollar index (BBDXY) ripped through yesterday's best levels on its way to fresh cyclical highs, even as U.S. Tsys richened across the curve. All three main U.S. e-mini contracts sank.
• Spot USD/CNH added ~215 pips on a flight to safety, with the move likely facilitated by a slightly weaker than expected PBOC fix. The mid-point of permitted USD/CNY trading band was set 18 pips above expectations.
• Greenback strength drove EUR/USD to its lowest point since 2002, with the pair bottoming out at $1.0006. The rate sits within touching distance from parity, owing to the Eurozone's exposure to the fallout from Russia's war on Ukraine.
• The kiwi dollar showed resilience despite its commodity-tied peers coming under pressure. Reminder that the RBNZ will announce its rate decision on Wednesday, it is expected to hike the OCR by 50bp.
• On the radar today we have German ZEW Survey and remarks from Fed's Barkin, ECB's Villeroy & BoE's Bailey.