Positives Dominate

Positive developments kept risk sentiment buoyant, as U.S. President-elect Biden's team ruled down a nationwide lockdown, 15 Asia-Pacific nations signed off on the world's largest regional free trade pact (RCEP), while the PBoC net injected CNY600bn of liquidity via its MLF facility. The upcoming announcement from Moderna on its Covid-19 vaccine research helped bolster sentiment and outweigh some familiar negatives. The greenback led losses in G10 FX space, with safe haven peers JPY & CHF sinking in tandem.

• Optimistic mood music lent support to commodity FX, which allowed NZD & NOK to top the G10 scoreboard. While the finalisation of the RCEP pact had the potential to soothe concerns over the close but tense Sino-Australian trade relationship (both are signatories to the deal), subsequent press reports noted that the bilateral spat over the recent trade disputes remain unresolved.
• Firmer risk appetite allowed GBP to shake off its earlier weakness, stemming from Friday's downgrade to the UK's credit rating by DBRS and uncertainty stoked by the news that PM Johnson was forced to go into quarantine as he was preparing to launch a "political reset".
• USD/CNH went offered owing to broader dollar weakness. There was little price reaction to China's monthly economic activity data, which included a beat in industrial output, a below-forecast acceleration in retail sales growth & a surprise downtick in unemployment.
• USD/KRW plunged through its 2019 lows and South Korea's MoF had to use some jawboning to kick the pair off worst levels. An MoF official said that the recent FX moves are excessive and authorities will take aggressive measures to stabilise markets.
• Focus moves to U.S. Empire M'fing, Canadian M'fing Sales, final Italian CPI & comments from RBA's Lowe, Fed's Clarida & Daly, ECB's Lagarde, de Guindos, de Cos, Mersch & Centeno, Riksbank's Skingsley & BoE's Haskel.