Covid Concerns Sap Risk Appetite

Risk appetite is subdued to start the week as markets assess the worsening pandemic worldwide. USD was also supported as US yields rose on reports that Democrats could use rare procedural tactics to pass parts of the stimulus package that wouldn't get Republican support.

• AUD is slightly higher, boosted by reports from the state of NSW that there were no locally transmitted cases for a seventh straight day and internal border restrictions are on the cusp of being lifted. NZD suffered after New Zealand reported its first community transmission of Covid-19 in two months.
• USD/JPY rangebound in early Asia-Pac trade, last trades flat at 103.78.
• PBOC fixed USD/CNY at 6.4816, in line with sell-side estimates. The bank injected only CNY 2bn in OMO's, there are reports today that the PBOC could use the contingent reserve arrangement (CRA) to ensure liquidity before the LNY holiday. Elsewhere, Sino-U.S. tensions remain under scrutiny after Chinese military aircraft incursions into Taiwanese airspace over the weekend.
• EUR and GBP both slightly heavy. Over the weekend, ECB's Rehn told YLE TV1 that YCC would not be a sensible policy option for the ECB, as the eurozone has at least 19 different yield curves, while there are fresh coronavirus concerns in both the EU and UK.
• CAD also weaker on the session as oil holds losses following higher than expected stockpile data from the US.
• Looking ahead key events in the session come in the form of the German IFO survey and a slew of ECB speakers.