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Global Coronavirus Concerns Weigh

FOREX

A muted start for the FX space in Asia on Tuesday after some sizable moves on Monday. Sterling crosses dived Monday as the UK imposed a nationwide lockdown across England after NHS leaders from the UK's constituent nations warned that hospitals are at the cusp of becoming overwhelmed. GBP has steadied in Asia and awaits further catalysts.

  • AUD & NZD currently treading water after coming off highs on Monday as the US dollar recovered losses. Australian ANZ Job Advertisements rose 9.2% in December, down from 13.5% in November, markets shrugged off the data.
  • The government in Japan is making moves to tighten coronavirus restrictions. A Nikkei piece has noted that "Japanese Prime Minister Yoshihide Suga's government is poised to declare a state of emergency for the second time in the COVID-19 pandemic, acting as soon as Thursday to combat surging cases in the Tokyo area." The measures would cover Tokyo and neighbouring prefectures, and would accompany further measures such as suspending foreign arrivals. JPY crosses are holding steady, USD/JPY last up 1 pip at 103.14.
  • There are some potential headwinds for EUR. German Cll'r Merkel is expected to hold a press conference at some point today to announce the decision on extending lockdown measures beyond the current deadline set for Jan 10. Bild reported that the authorities have agreed for an extension through the end of the month. Meanwhile, Italy decided to extend and expand its coronavirus curbs to mid-Jan.
  • In the US Cleveland Fed's Mester spoke and said accommodative policy would remain for quite some time, while Atlanta Fed's Bostic said the Fed could reduce bond buying in 2021 if vaccine roll out boosts the economy as expected. The comments didn't have an immediate effect on the US dollar.
  • The yuan has continued its run higher. The PBOC fixed USD/CNY at 6.4760, some 648 pips lower than yesterday. The yuan has maintained its strength against the US dollar, even as other currencies have dropped back. The PBOC drained CNY 130bn of liquidity today, denoting a total of CNY 270bn drained already this week.
  • Up today: U.S. ISM M'fing, German retail sales & unemployment, flash French CPI and comments from Fed's Evans & Williams.
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