A further pick-up in wages growth is expected as the labour market tightens. The emergence of the Omicron strain is a new source of uncertainty, but it is not expected to derail the recovery.

Next to that, it even turned somewhat more upbeat. The new policy statement dropped several small references arguing to keep monetary policy as long as possible very accommodative. The Australian central bank (RBA) kept its policy rate unchanged this morning at 0.1%. The combination with risk-on may help an ailing euro though first meaningful resistance in EUR/USD is still a long way off (1.1422). First resistance in the US 10y stands at 1.48%. German Bunds may underperform after missing out on the US and HolzmannвЂ™s speech yesterday. A very upbeat Asian session inspired by strong Chinese trade data and yesterdayвЂ™s EU/US performance is set to spill over back into European dealings again. Apart from second-tier European data (ZEW), the economic calendar eyes meagre, putting sentiment at the driverвЂ™s seat. Omicron needs time to be assessed, part of inflation is going to subside before any rate increase had time to take effect but tight labour markets pose upside risks to wage costs. BoEвЂ™s Broadbent in a balanced speech declined to answer whether a rate hike is needed in December. Sterling strengthened from EUR/GBP 0.856 to 0.8507.

The trade-weighted DXY went from 96.11 to 96.33. Searing US yields also gave the USD an edge despite the risk-on. Turning to FX markets, the Japanese yen and Swiss franc reversed FridayвЂ™s gains. In such circumstances he clearly likes to have the option to raise raising rates even if bonds are still being bought. Holzmann thinks itвЂ™s very unlikely for inflation to be below 2% in 2022 as a whole and expects supply bottlenecks to persist. ItвЂ™s the first call from within the Governing Council to abolish the long-standing sequence between asset purchases and interest rate hikes. He said Interest rates could be increased while net purchases are still in progress - if IвЂ™m not mistaken, the Swedes did something like that in early 2020 and, contrary to what some feared, capital markets werenвЂ™t disrupted. Being delivered after-market, ECBвЂ™s HolzzmanвЂ™s interesting speech also didnвЂ™t affect European bonds (yet). German yields thus missed out on the yield rally, rising a mere 1.7 bps at the short end. Most of the US action happened after the European close.

The 10y clawed its way back above recently broken neckline support of 1.41%. US yields added 4.3 bps (2y) to 9.9 bps (20y). Core bonds fell with USTs hugely underperforming the Bund. Equities jumped from 2% in Europe and the US. Bargain hunters scooped up heavy-hit stocks, led by travel and airlines. It helped shape the constructive risk setting too. The PBOC during the day cut the RRR with 50 bps, freeing up liquidity to support the economy. YesterdayвЂ™s optimism arose from early hospital data in South Africa and US medical advisor Fauci on Sunday being hopeful that omicron is only causing mild symptoms. There was a bit more hesitation compared to when delta emerged, but it seems that omicron for now simply provided a buying opportunity.

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