Caution Prevails Ahead Of Holiday Season, Sterling Struggles On Familiar Risks

Headline flow was subdued overnight, providing little in the way of major catalysts. The greenback gained on the back of broader cautious feel and demand for USD ahead of the holiday season/year-end, with participants assessing familiar risks.

• GBP traded on a softer footing, with focus on UK Covid-19 matters/Brexit saga. The Telegraph reported that UK MPs have been told to be ready for voting on a Brexit deal next Wednesday, but the article also cited sources from both sides of the English Channel downplaying yesterday's reports re: fresh UK offer on fishing rights. MNI sources noted that the offer improves odds of reaching a deal, yet "Brussels is exp. to hold out for further concessions."
• Antipodean currencies faltered amid sour risk appetite, with most regional equity benchmarks trading in the red. The Covid-19 outbreak in NSW/Sydney continued to undermine sentiment, but an above-forecast flash reading of Australian November retail sales allowed AUD to outperform its cousin from across the ditch. AUD/NZD extended its winning streak to four consecutive sessions and crossed above the NZ$1.0700 mark.
• The PBOC fixed USD/CNY at 6.5387, stronger than yesterday's fix of 6.5507. The PBOC injected CNY 120bn of liquidity, bringing total injections this week to CNY 210bn – observers note the central bank are ensuring ample liquidity into year-end. USD/CNH added ~100 pips, but failed to test Monday highs as of yet.
• USD/Asia mostly edged higher, though TWD bucked the trend and firmed up after a beat in Taiwanese export orders. KRW faltered under pressure from local coronavirus worry, THB struggled as PM Prayuth mulled introducing nationwide Covid-19 restrictions, while IDR was heavy after FinMin Indrawati said Indonesia may experience a deeper econ contraction than exp. Bank Indonesia intervened in FX spot interbank mkt to maintain rupiah stability.
• Final GDP from the UK, Conf. Board Consumer Confidence, existing home sales & third GDP reading out of the U.S. & Swedish retail sales take focus today.