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The risk sentiment remained softer across the financial markets in Asia this Thursday on the back of looming US-China trade worries and mounting UK political/ Brexit uncertainty. As per the latest reports, the US urged the South Korean companies to reject Huawei’s products.     Amid risk-aversion, the safe-haven Yen received a fresh lift at the expense of the higher-yielding assets such as the Asian equities, US equity futures, oil prices and Treasury yields. However, the traditional safe-haven gold failed to benefit from the flight to safety, as a broadly firmer US dollar amid a “patient stance” highlighted by the recent FOMC minutes continued to pressure the yellow metal.

The Antipodeans traded on the back foot and held near multi-month lows. The AUD/USD pair managed to reverse the early decline to 0.6865 region but the recovery was capped by 0.68801 levels. The USD/JPY pair enjoyed good two-way businesses, having initially dropped to 110.15 lows as risk-off intensified. However, dovish comments from the BOJ policymakers and contraction in the Japanese manufacturing PMI help the major regain the 110.30 level.

Amongst the European currencies, the EUR/USD pair traded weaker near 1.1150 levels while the Cable stalled its recovery and slid back towards the 4-month lows amid bleak UK political scenario.  

Main Topics in Asia

The 1922 executive wants UK PM May to announce that she will step down as Tory leader by June 10 – ITV

UK PM May will resign on Friday – The UK Times

NZ FinMin Robertson: NZ will target debt of 15 to 25% of GDP from FY 2021/22

Australia 10-yr yields fall 4bps to 1.59% – fresh record low

Trade will not be the focus of US Pres. Trump’s upcoming trip to Japan – Nikkei

UK Tory lawmaker Rees-Mogg: PM May’s Brexit plan is worse than before

Gold again fails to shine in the risk-off environment

Asian stocks report modest declines, Shanghai Composite drops below 100-day MA

US urges S. Korea to reject Huawei products, citing security risks – Chosun Ilbo

BOJ’s Amamiya: Need to continue easing persistently

USD/INR: Rupee may open higher with Modi’s ruling party taking early lead in vote count

BOJ’s Wakatabe: BOJ is not yet at the stage of discussing exit

Key Focus Ahead

We have an action-packed European calendar today, kicking-off with the German final GDP release at 0600 GMT. The release will be soon followed by the Swiss industrial figures that will drop in 0630 GMT. The main focus for today remains the Euro area flash manufacturing and services PMI reports, trickling in from 0715 GMT. Despite upbeat flash readings anticipated, markets may remain wary ahead of the European Union (EU) elections. At 0800 GMT, the German IFO survey will be also published. Meanwhile, the UK docket remains data-empty, as the focus remains on the UK political developments, with the UK PM May likely to resign this Friday.

In the NA session, the US weekly jobless claims and the Canadian wholesale sales data will drop in at 1230 GMT, followed by the US Markit manufacturing and services PMI reports due at 1345 GMT. Next of relevance is likely to be the US new home sales data slated for release at 1400 GMT among other minority reports.

Later in the American afternoon, a slew of speeches by the FOMC members Kaplan, Bostic and Barkin will be closely heard following Wednesday’s FOMC minutes release.

EUR/USD: Data-heavy day ahead, European election uncertainty may restrict gains

EUR/USD  is on the back foot near 1.1150 ahead of key macroeconomic data released in Europe, having created a bearish hammer candle on Wednesday. Caution due to European Union elections will likely limit the EUR’s ability to cheer upbeat macro data.

GBP/USD heads back towards 4-month lows amid growing UK political risks

GBP/USD  broke its consolidative phase seen in early Asia and resumed its recent bearish momentum as growing concerns over the UK PM May’s resignation are back in play heading towards the European trading.

European Elections Preview: A Backlash against the backlash may be euro-positive, but watch Merkel

Many Europeans are not happy with the system ten years after the crisis, may vent their anger in the European elections, frustrate further integration, thus sending the euro down.

USD/INR  forecast: A majority for BJP-led NDA would be positive for Rupee, but upside limited

The  USD/INR  pair will likely see big losses on Thursday only to bottom out in the next week or two if the BJP-led NDA gets a clear majority as expected.  It is worth noting that the BJP victory is being priced in since the end of February.