Asia Plays It Safe

Caution prevailed as combative Five Eyes communique re: China's recent measures vs. Hong Kong and press reports suggesting that EU leaders may want to draw up contingency plans for a no-deal Brexit took focus, against the backdrop of the lingering Covid-19 angst. In the latest developments, Tokyo raised its virus alert to the highest level, South Australia started its "circuit-breaker" lockdown and South Korea's case count eclipsed yesterday's multi-month high. Risk aversion prompted participants to seek safe havens, bolstering USD, JPY and CHF.

• The Antipodeans went offered despite the release of a strong Labour Force Survey out of Australia. An unexpected addition of 178.8k jobs (vs. forecasts of a 27.5k dip) was coupled with a surprise upswing in the participation rate, which yielded a milder than projected uptick in the unemployment rate, with both underemployment and underutilisation easing off. AUD crosses blipped higher only briefly in reaction to the report, though AUD/NZD swung to a gain and held above neutral levels.
• GBP was the worst G10 performer after the Telegraph & the Times reported that EU leaders were set to demand from the European Commission to come up with plans for a no-deal Brexit, should there be no trade agreement between London and Brussels in the coming days.
• USD/Asia crept higher on the back of preference for safer assets. KRW was easily the worst performer in the region, after South Korea took its jawboning to the ministerial level, with FinMin Hong pledging active measures "at any time" if needed to stabilise FX markets. Reports were doing rounds of suspected BoK purchases of USD to stymie KRW appreciation.
• U.S. initial jobless claims, existing home sales & Philly Fed Biz. Survey, Swedish unemployment and speeches from Fed's Bostic, Mester & Rosengren, ECB's Lagarde, Villeroy, de Cos & Schnabel take focus today. EM central bank activity picks up, with MonPol decisions from BI, BSP, SARB & CBRT coming up.