The USD Index is consolidating after a sharp recovery yesterday on improved risk sentiments as concerns over Hurricane Irma and North Korea abated. JPY continues to remain the weakest G10 currency this week but given that the movements in the Yen are largely risk dependent we can see a sharp rise if sentiments worsen. The commodity currencies also continue to improve with NZD, CAD and AUD number one, three and four, respectively. The rally in NZD is partially driven by the emerging polls for the upcoming general election which shows an increased support for the nationalist party. That said, we see bullish NZD trade being more dependent on the rates market with paying rates looking more attractive given an improved global outlook. Elsewhere, GBP continues to remain strong ahead of the key UK CPI release today where a strong print of 2.8% is expected; in our view, a data beat is likely to raise chances that BoE will err on the hawkish side on Thursday. In the equities space, the Nikkei 225 has closed +1.18% at 19776.62 and the European equities have also opened firmer with FTSE up 0.1%, DAX up 0.4%, and CAC up 0.3%. In the rates market, the German and US 10-year yields have risen sharply once again. The US and German 10-year are now trading at 2.15% and 0.36%, respectively. In the energy space, the WTI front month is consolidating around $47.96 after a sharp recovery in oil yesterday. In terms of data today, the Swedish inflation rate came in at 2.1% slightly weaker than 2.2% expected but SEK still rose sharply as CPIF, a measure the Riksbank will look at for setting monetary policy, came in as expected. Looking ahead the UK CPI is the key data from Europe today at 0830 GMT while Jolts job opening at 1400 GMT is the only data of any significance from the US.
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