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After a buoyant start to trade on Wall Street yesterday, investors pared risk exposure into the close of US trade, as markets eyed Fed Chair Powell's speech today, ahead of Thursday's US inflation data. Yesterday, saw further hawkish rhetoric from Fed speakers stating it was too early to declare victory over inflationary threats, non-voter Bostic claimed that rates should be held above 5% for 'a long time' to come. Asian equity markets followed suit overnight giving back some of Monday's gains, however, Asian investors remain hopeful that the China re-opening story is set to provide support for equity markets in the region.

In the UK, Bank of England's Chief Economist Pill, in comments made yesterday, highlighted that he is seeing signs of a turn in the UK employment market, this view was given further credence this morning, with recruitment data from the UK suggesting a further cooling in employment in December, markets are still pricing another rate increase in February from the BoE as most members of the committee remain concerned about elevated double-digit inflation pressure.

Today's economic calendar is somewhat sparse, with no tier one data of note, instead, investors will be laser-focused on a bevy of Central Bank speakers set to deliver remarks at the Swedish Riksbank International symposium, Bank of England Governor Bailey will act as a moderator for a panel discussion involving ECB Executive Board member Schnabel, Bank of Canada Governor Macklem, Bank of Japan Governor Kuroda and the Fed Chair Jerome Powell. Markets will parse the discussion for clues as to future rate paths from these major central banks.

Markets-wise, investors are likely to remain cautious ahead of the Fed Chairs' remarks today, any market reaction is likely to remain somewhat contained as fresh bets are delayed until Thursday's inflation data, bullish spirits are certainly elevated as the first full week of trading for 2023 is underway, risk sentiment is underpinned with the Greenback remaining sub the 103.50 handle, and the US 10year yield sticky around the 3.5% level, any meaningful shift in these two inputs could spur a further pullback in risk sentiment, if the headline risk of the next few days can be navigated without any major fallout, investors will likely reload risk exposure into the back end of the week.

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