China Jobs Market Worry, Geopolitical Risks Undermine Risk Appetite

The mood music turned sombre in response to risk-negative headline flow from over the weekend. North Korea test-launched a ballistic missile from a submarine. This latest drill comes ahead of the presidential inauguration of South Korea's Yoon Suk-yeol, who will take office on Tuesday. As we near the European session, focus turns to the annual Victory Day military parade in Russia, with President Putin expected to touch upon the ongoing invasion of Ukraine in his address to the nation.

• Downbeat comments from Chinese Premier Li on domestic labour market situation reverberated across Asia, applying pressure to the redback and the broader Asia EM FX space. Offshore yuan went offered, even as the PBOC continued to lean against its depreciation via the daily fixing of USD/CNY mid-point.
• Yuan weakness amplified pressure to the Antipodeans, with AUD/USD finding itself within touching distance from the psychologically significant $0.7000 figure. The AUD and NZD led commodity-tied FX lower, even as crude oil prices recouped their initial dip.
• The greenback gained across the board as hawkish Fedspeak was doing the rounds. During NY hours on Friday, MNI ran comments from Fed's Barkin who said that "anything would be on the table," including an outsized 75bp rate hike.
• The prospect of tighter monetary policy helped the U.S. dollar outperform its safe haven peers CHF and JPY. As a result of greenback strength, USD/JPY marched to its best levels since Apr 28, when the pair printed its multi-decade high of Y131.25.
• The global data docket is rather thin today and includes Norwegian industrial output & Canadian building permits.