Themes

• General mood is “risk off”
• Flight to safety bid emerges ahead of FOMC and on Omicron
• FOMC expected to increase the taper and position for a rate hike early next year

What’s Moving

A decent flight to safety bid overnight saw the USD and JPY outperform the major currencies, while commodity currencies were the weakest across the board. The latest concern is emerging ahead of Wednesday’s FOMC meeting.

Many are expecting the Fed to increase the tapering, which will wind back the cash stimulus, and become more hawkish, preparing for a first in a series of rate hikes early next year. The FOMC doesn’t meet in December, and this is the last meeting of the year.

Also adding to the flight bid was news of an increase in Omicron infections in the U.S.

Thoughts

With little in the way of local data in Asia today, expect consolidation of the overnight USD strength in today’s session. There is also expected to be reduced local volumes ahead of the FOMC meeting on Wednesday night.

Pivot Points