What to watch

Omicron headlines will continue to dominate markets with some cautious optimism overnight seeing the Eurodollar strip move lower (helping the USD move higher). Commodities have also benefitted, leading to commodity currencies leading the way in FX.

• Friday will be the big day for data this week with US CPI and UK monthly activity data both due for release. Before then we will have some industrial production data from Eurozone countries (which will follow up this morning's weak German industrial orders data which has seen Bunds move higher on the European open).
• There is an absence of too much central bank speak scheduled for this week, at least in reference to monpol. However, in what could be a key event for UK markets Bank of England Deputy Governor Ben Broadbent is due to speak today on the outlook for the economy and monpol. This follows up comments from Saunders on Friday who, despite having voted for a hike in November, seemed much more cautious regarding Omicron and his vote for a December hike can no longer be taken for granted. Broadbent is considered the swing voter on the MPC, so if he also seems cautious, a December hike would start to appear to be a remote possibility.
• With little other monpol speak scheduled for this week, US curves and Eurodollars are likely to remain much more responsive to wider Omicron developments than EGBs or Euribors. So any positive news is likely to see the UST-Bund spread widen.