Caution Creeps In

Light risk aversion crept in amid concerns over potential delay to the U.S. Covid-19 relief package, spread of new variants of the virus and questions surrounding the pace of vaccine rollouts. Participants shied away from the Antipodeans with regional liquidity thinned by a market holiday in Australia. New Zealand confirmed that its latest Covid-19 patient was infected with the South African strain, but stopped short of changing national alert levels. AUD/NZD was poised to extend its four-day losing streak, but struggled to move through support from the NZ$1.0700 figure/100-DMA.

• JPY & USD firmed up a tad on the back of safe haven demand. The DXY edged higher but failed to test yesterday's peak.
• The PBOC fixed USD/CNY mid-point at CNY6.4847, around 19 pips higher than sell side estimates, as demonstrating its asymmetric response to yuan strength. It also withdrew CNY 278bn of liquidity from the system, even as LNY and tax payments loom, with a PBoC advisor signalling the need to curb asset bubbles.
• EUR/USD was stable and continued to rest upon its 50-DMA. Italian PM Conte is expected to hand in resignation today, hoping to return at the helm of a new Cabinet.
• Cable slipped past yesterday's trough with markets awaiting UK gov't's decision on tighter border controls. Ministers are expected to sign off on plans to force some inbound travellers to quarantine in hotels upon arrival.
• UK labour market report, U.S. Conf. Board Consumer Confidence and comments from ECB's Centeno & de Cos will grab attention today.