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The risk-off sentiment was the underlying theme in Monday’s Asian trading, as the ongoing US-China tensions flared up after US President Donald Trump and Secretary of State Mike Pompeo blamed the Chinese government for intentionally concealing the severity of COVID-19 from the international community in early January.

The holiday-thinned trading exaggerated the risk-off moves, especially after Trump said tariffs would be `ultimate punishment’ on China. The US dollar jumped sharply across the board on the revival of the safe-haven demand. Gold, however, failed to benefit amid a stronger greenback and remained depressed below $1700 mark.

The Japanese and Chinese traders were away on a national holiday while the rest of Asia traded mixed. The US equity futures dropped 1% while the benchmark 10-year US Treasury yields tanked about 3.50%.

Across the fx space, USD/JPY dropped to 106.70 region, with the downside cushioned by broad dollar comeback. AUD/USD hit multi-day lows below 0.6400 while the kiwi was the top loser, down 0.75% but managed to hold above 0.6000. USD/CAD tested 1.4150 amid a 6% drop in oil prices.

Among the European currencies, EUR/USD dropped back towards 1.0900 while the cable extended its retreat below 1.2450 amid uncertainty over the UK’s coronavirus situation.  

Main topics in Asia

Gilead CEO: Remdesivir available to coronavirus patients this week, ‘We’ve donated the entire supply’

UK Government lockdown to come under sustained criticism from Conservative MPs – Telegraph

US Republican Senate conference want to wait before passing another coronavirus stimulus package – Axios

Britain and America will officially launch talks for a major free trade agreement on Tuesday – UK Express

US President Donald Trump: “Intelligence has just reported to me that I was correct” on China

Pompeo’s anti-China bluff strategy reveals all-or-nothing mentality to fool US voters – GT

Trump says tariffs would be the `ultimate punishment’ on China

China reports 3 new coronavirus cases, all imported

NZD bullish: NZ PM Ardern invited to Australia’s National Cabinet on Tuesday

S&P affirms New Zealand’s AA Ratings with outlook – Positive

RBNZ: Term lending facility to be available to banks from May 26

Japanese Panel recommends state of emergency extension to May 31

Key focus ahead        

Monday’s EUR macro calendar is a busy one, with the final Manufacturing PMI reports from the Euro area to headline, followed by the bloc’s Sentix Investor Confidence due at 0830 GMT. The UK docket is data-empty and hence, the virus-related updates and Brexit headlines will keep the GBP traders busy alongside US-China tensions driven dollar dynamics.

In the NA session, the US Factory Orders, dropping in at 1400 GMT, will be of note among a couple of minority reports. Meanwhile, coronavirus-related headlines will be also closely followed.

EUR/USD: Risk-off threatens to derail three-day winning streak

EUR/USD drops as the decline in the US stock futures puts haven bid under a dollar. Risk sentiment takes a hit on rising US-China tensions. Trade war fears return as Trump renews tariffs threat to China.

GBP/USD prints losses below 1.2500 as trade sentiment turns heavy

GBP/USD extends Friday’s losses amid risk aversion. Broad US dollar strength, amid US-China tussle, challenges to the UK PM Boris Johnson-led government also weigh. A light economic calendar keeps qualitative catalysts in the driver’s seat.

Oil Market Special: Has oil bottomed out?

Over the short term, if WTI prices can close above $20.27 – a critical inflection point for oil prices, the impact of last week’s historical splat in crude oil prices would be lessened while also boosting sentiment.

RBA Preview: Markets looking for forecasts, not action

Not much expected from the RBA this week, other themes in play. Geopolitical risk is heating up between the US and Australia.