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Asian equity markets took their lead from Friday's positive close to trade on Wall Street, with US equity markets posting their best gains for over a month, markets are once again pinning their hopes on a Fed pause or pivot, this view was primarily driven by the investor belief that the dire ISM print Friday suggests imminent recession in the US, investors took this data as bad economic news meaning good news for markets as the data may give the Fed cover to pause if not pivot on their current rate trajectory. The improved risk sentiment has driven the Asia Pacific MSCI index back into bull market territory, gaining 20%+ from the lows, the index has been given a further boost by the China re-opening story, with the region removing quarantine restrictions for inbound passengers.

In the UK there is no tier-one economic data of note today, investors will parse comments from the Bank of England Chief Economist, Huw Pill, who speaks at a conference at the New York University later today, Pill voted for a 50bps rate increase at the December meeting, stating that he preferred a pre-emptive approach to fighting inflation risks, as inflation remains stubbornly in double-digit territory, investors will look for further confirmation of a 50bps move at the next BoE meeting.

In the Eurozone, the focus will be on unemployment data which is expected to remain in the 6.5% ballpark, this release will be coupled with the Eurozone investor confidence report, and market watchers are anticipating modest improvement from the December -21 print, consensus suggests an uptick to -18 for January.

In the US, post-Friday's mixed bag of data, with Non-farm payrolls remaining relatively robust but the ISM data deteriorating at a clip, investors will be attuned to comments from Fed officials Daly and Bostic who both speak this afternoon, however, neither are voting members this year so their views will carry less weight than they did in 2022 The main events in the US this week will be Fed Chair Powell's speech tomorrow ahead of Thursday's critical inflation data ahead of the US Bank earnings, with JPMorgan reporting Friday, this earnings season is going to be critical for investor sentiment, with market watchers anticipating a potential earnings recession to develop in the first half of 2023.

Markets-wise, the Dollar story remains front and center as we head into 2023, positioning has shifted significantly, with investors paring support for the greenback, the Dollar closed out 2022 with a 7.6% decline, printing its poorest quarterly decline in Q4 22 since 2010 and 2000 respectively, it is noteworthy that we are heading into the most seasonally strong period for the USD from a historical perspective, with the reset in investor positioning could there be scope for some corrective upside in the world's reserve currency?

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