What to watch

Yesterday we saw an aggressive repricing of the US curve with the Eurodollar futures strip moving 12-13 ticks lower through the Greens and Blues while corresponding moves in Euribor futures saw the strip 3-4 ticks lower. These moves benefitted the dollar, particularly against the euro and yen.

• There has since been a more consolidatory feel to markets through the Asian session, but we note that with London still in holiday mode yesterday, there could be a lot more market participants returning to their desks this morning who may be eager to establish some early 2022 positions.
• Looking at the calendar, the highlight of the week will of course be the US employment report on Friday but we have a number of other important releases before then (including the FOMC Minutes). We have just seen the French flash HICP print at 3.4%Y/Y, a tenth lower than expected, and in line with the November print. We will also receive Italian HICP data tomorrow with German and Eurozone inflation data due Thursday.
• Also on the calendar today we have a final print of the UK PMI manufacturing this morning as well as the US ISM manufacturing print. The employment component will be watched while JOLTs may get a little more focus on than usual after Powell mentioned that he was watching the measure.
• The market seems to be a little less concerned about the prospects of Omicron, with the English government seemingly unwilling to extend to further measures and increasing evidence confirming that Omicron is a more mild disease. However, there will still be some potential for any further government restrictions, particularly across the Eurozone if more regulations are brought in.