STIR: Fed Rate Cut Expectations Within Wide Ranges, ADP & ISM Services Ahead

• Swiss Franc price action is catching the eye Monday, a notable underperformer across G10 as we approach the NY crossover. After reaching a new decade low of 0.9140 in APAC trade, EURCHF has had a solid turnaround, rising to a session high of 0.9212 in recent minutes.
• Broader cross-asset sentiment has most recently stabilised, potentially assisting the cross/CHF recovery, however, given the de-risking that has been on display elsewhere since Friday, short-term positioning dynamics may be assisting the squeeze.
• EURCHF lows today may also be approaching the threshold that could be considered alarming for the SNB. We highlighted last week that JPM stated we need to see EURCHF getting closer to 0.91 quickly for them to get worried, while ING said "the fact that EURCHF is offered near 0.92 and that USDCHF has broken under 0.7800 will be ringing alarm bells in Zurich”.
• As a reminder, President Schlegel spoke last week on the current economic situation and monetary policy, and notably there was no mention of the recent CHF strength.
• Today’s CHF reversal comes despite the earlier retail sales data beat, underpinning the narrative that the Swiss consumer is in solid shape and, barring new shocks, the SNB is likely to hold its policy rate at 0% for the foreseeable future.

UBH6 5K blocked at 109.86, recent downtick suggests a seller, despite being conducted above the prevailing offer at time quoted by BBG. DV01 ~EUR1.06mln.

• The weaker commodity complex, with oil also down ~5%, did weigh on the likes of AUD and NZD to start the week, although both have stabilised across the European morning. Positioning dynamics will also be a consideration for AUD as we approach the RBA decision tomorrow.
• The combination of a resilient labour market and stronger than expected Dec/Q4 inflation has the sell-side consensus expecting a 25bp RBA rate hike tomorrow. If delivered, focus will be on how much follow up action the central bank sees as needed to ensure inflation returns to target.
• For AUDUSD, the recent streak of consecutive winning sessions came to an end on Friday, and spot has subsequently stabilised around 0.6950. The latest pullback highlights the start of a corrective phase. If correct, it suggests potential for an extension towards support around the 20-day EMA, at 0.6835. This would also confirm an unwinding of the recent overbought trend condition.
• Key short-term resistance and the bull trigger have been defined at 0.7094, the Jan 29 high.