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Amid ongoing Hong Kong violence and dimmed US-China trade deal prospects, the risk-off sentiment was the main underlying theme in Asia this Wednesday. The US dollar traded modestly flat against the Euro, the Yen and the Aussie while fell against the Swiss franc, gold and Kiwi, having ignored the rise in the US Treasury yields.

The New Zealand dollar outperformed the fx board after the Reserve Bank of New Zealand (RBNZ) surprised markets to the upside by standing pat on in its monetary policy, with the OCR unchanged at 1.00%. The NZD/USD pair rallied nearly one big figure on the rate decision and reached fresh six-day highs at 0.6416 before easing to near 0.6400. Meanwhile, the Aussie witnessed an up and down session and held near two-week lows of 0.6831. The moves were driven by the broader market sentiment amid growing trade worries and mixed Australian macro news. The USD/JPY pair hovered in a 25-pips narrow range around the 200-DMA at 109.03, with the upside limited by the losses in the Asian equities and US equity futures. Oil prices also slipped, tracking the negative risk tone on trade jitters, and added to the weakness in the Canadian dollar. USD/CAD eked out mild gains to test the 1.3250 level.

Among the European currencies, the EUR/USD pair defended the 1.10 handle but the bounce appeared shallow amid weaker Chinese Yuan and Euro area growth concerns. The Cable kept its range around the midpoint of 1.28 the handle ahead of the key UK inflation data.

Main Topics in Asia

WH Adviser Kudlow: No tariff adjustments until China deal has been finalized – CNBC

US Justice Department: Chinese national pleads guilty to theft of trade secrets from the US petroleum company

Quite a lot of criticisms and complaints about China from US Pres. Trump – Global Times

BCG: Realistic view needed to resolve China-US trade woes – Global Times

Tariffs still a major hurdle in US and China reaching a trade deal – WSJ

Fed’s Kashkari: Feeling a little bit better about the US economy than he had a few months ago

BOJ’s Kuroda: Important for Japan to ensure it has market’s trust in medium, long-term fiscal health

RBNZ leaves rates unchanged at 1.00%. disappoints the doves – Kiwi rallies hard

US Pres. Trump offers trade deal, sanctions workaround to Turkey’s Erdogan – WaPo

RBNZ’s Orr: On hold decision was unanimous

RBNZ’s Orr: No urgency to further easing at this point

Key Focus Ahead

We have a busy day ahead, in terms of the economic data/ events, as markets gear up for day 1 of the Fed Chair Powell’s testimony, due later in the American mid-morning at 1600 GMT, especially after the Trump disappointment on trade. Also, in focus remains the speech by the Fed officials Barkin and Kashkari that will follow Powell’s.

On the data front, the Consumer Price Index (CPI) reports from both the UK and US will hog the limelight in the EU and NA session respectively. Meanwhile, the second-liner German Final CPI and Eurozone Industrial Production data will be also watched alongside any fresh developments on the US-China trade issue and UK politics. Towards the NY closing, the weekly US Crude Stocks data will be published at 2130 GMT, by the American Petroleum Institute (API).

EUR/USD defends 1.1000 ahead of key data, Powell’s testimony

EUR/USD off four-week lows but downside risks persist. USD/CNY’s rise amid trade uncertainty could limit the EUR bulls. The focus stays on Eurozone Industrial Production, US CPI and Powell’s testimony.

GBP/USD: Modestly changed below 21-day SMA ahead of UK CPI

While the absence of major catalysts from the UK has recently tamed the GBP/USD pair’s moves, the market’s fear ahead of the key data/events also contributes to the latest inactivity.  The Cable  seesaws around 1.2850 during pre-London open on Wednesday.

UK inflation report outlook: GBP/USD may stumble on another CPI slide

UK inflation is set to slow to 1.6% yearly in October.  Odds of a rate cut may rise if CPI extends its slump. GBP/USD bias is to the downside after weak data, fresh election uncertainty.

US CPI Preview: Inflation remains secondary to Fed policy

Annual core and headline CPI stable in October. Federal Reserve rate pause does not reference inflation. Core CPI has averaged 2.17% through September this year.

Chairman Powell before Congress: Praising the economy and rebutting the President

Federal Reserve  Chairman Jerome Powell  will repeat in Congress the  monetary policy  message he delivered after the October 30th  FOMC meeting.