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China Reports Help Underpin Risk Sentiment

FOREX
  • Currency markets have adopted a generally risk-on tone, with focus on the growing possibility that Chinese authorities could roll back COVID restrictions at a faster pace than previously expected.
  • Reports suggest COVID-19 management in China could be downgraded to Category B as soon as January. This would mark a downgrade from the current level of management (Category A) which is infitting with measures surrounding highly infectious diseases such as bubonic plague and cholera. This isn't a new concept and had been floated by domestic press, but some more clarity on timing has helped support risk.
  • JPY is comfortably the poorest performer in G10, with the greenback similarly weak. China remains the driver here, with further evidence emerging of a rollback in COVID restrictions and a possible pivot in policy in the near future.
  • Price action has put USD/CNH comfortably below 7.00 to hit 6.9373 - the lowest since mid-Sept - with the likes of iron ore, local equities and AUD also higher to reinforce the risk-on.
  • AUDJPY has bounced well off the Friday low, and now faces 92.242 as near-term resistance ahead of the 200-dma at 92.9118.
  • Focus turns to the ISM Services Index for November, seen slipping to 53.3 from 54.4 previously. Final durable goods orders number also cross. ECB's Wunsch is the sole speaker on the docket. The Fed have now entered their pre-decision media blackout period.
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