Fresh US-China political tensions cropped up after the US Senate approved the Hong Kong Human Rights and Democracy Act of 2019 and China threatened to retaliate against the US interference in its internal affairs. The investor sentiment got heavily hit by the latest Chinese angst as it could weigh negatively on the US-China trade talks. The safe-havens such as the JPY, US dollar and Gold advanced at the expensive of the risk/ higher-yielding assets such as Treasury yields, global equities and Antipodeans.
Both the Aussie and the Kiwi felt the heat of the mounting US-Sino trade and political risks. AUD/USD traded in the red but held above the 0.68 handle while NZD/USD fell about -0.15% to near 0.6415 levels. Meanwhile, USD/JPY moved off lows but the recovery lacked follow-through around mid-108s amid risk-aversion. USD/CAD benefited from a broadly firmer US dollar and subdued oil prices, as markets eyed the Canadian inflation data.
Heading into the European open, both the EUR/USD pair and Cable were under pressure. The pound suffered from ITV’s political debate between Johnson and Corbyn that ended on a poor note.
Main Topics in Asia
UK election debate: Common ground that UK austerity is over – Rabobank
Australian Leading Index keep signaling weak economic momentum carrying into 2020 – Westpac
US Senate approves Hong Kong human rights bill, sends to House of Representatives – RTRS
US Commerce Sec Ross: I am optimistic we can get something done on China
US 10-year Treasury yield hits two-week low
Fitch affirms China at ‘A+’; outlook Stable
China’s ForeignMin reiterates threat to retaliate against US bill on Hong Kong
China’s ForeignMin: Logged stern representations with the US over Senate action on Hong Kong
The PBoC prime loan rate decisions: Cut by 5 basis points for 1 and 5 year rates (CNY lower)
Japanese ruling coalition are seeking JPY 10 tln for the extra budget – Nikkei
NZD bullish: BNZ ups Fonterra’s milk payment forecast
PBOC’s Yi: PBOC to continue to strengthen counter-cyclical adjustment, increase credit support
Japan’s Nishimura: No change to view that economy is recovering
Sources: China tariff demands may expand ‘phase one’ trade deal significantly – Reuters
USD/INR remains under pressure as US-China tussle dominates Asia
Key Focus Ahead
Germany’s Producer Price Index (PPI), due at 0700 GMT, will kick-off a quiet European calendar, as the only release of note remains the European Union (EU) Financial Stability Review at 0900 GMT. The UK docket continues to remain a dry one so far this week, as the UK political updates take over ahead of the December 12 elections.
In the NA session, the main event risk remains the US Federal Reserve (Fed) Oct meeting’s minutes due at 1900 GMT, which will be closely followed for any hints on a Dec rate cut and 2020 US interest rates outlook. Ahead of the Fed event, the Canadian Consumer Price Index (CPI) figures will headline at 1330 GMT. Also, the focus will be on the US weekly Crude Stock data due to be published by the Energy Information Administration (EIA) at 1530 GMT and the European Central Bank (ECB) policymaker Lane’s speech scheduled at 1700 GMT.
Meanwhile, the overall market sentiment will continue to remain at the mercy of the US-China trade and political developments at least until the FOMC minutes release.
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