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Risk Aversion Takes Hold As Shanghai Covid Hopes Get Quashed By Community Cases

FOREX

Risk-off flows have taken hold as Shanghai's latest Covid-19 case count nipped hopes for imminent relaxation of curbs in the bud. The Chinese megacity found two cases in the community, which effectively stops the three-day countdown to the moment when the authorities would be able to ease curbs. For this to happen, the city must record three consecutive days of zero community transmission of the virus. Headlines on Shanghai's Covid-19 situation were followed by the news that North Korea has moved to lock down all of its cities after confirming its (allegedly) first coronavirus infection.

  • Adding to the broader sense of concern were signs of continued distress in China's property market, as developer Sunac said it doesn't expect to make interest payments on its Oct 2023 bond and other senior notes.
  • G10 currency pairs trade in a characteristically risk-off manner. The Antipodeans have lost ground, while traditional safe havens sit at the top of the performance table.
  • Risk barometer AUD/JPY sank to its worst levels since Mar 22, breaking firmly below the Y90.00 figure, but USD/JPY has not yet tested yesterday's low.
  • The kiwi dollar already underperformed earlier in the session as participants positioned ahead of the release of quarterly RBNZ report on inflation expectations.
  • After Asia hours, focus will turn to UK GDP (flash) & Swedish CPI as well as U.S. PPI & weekly jobless claims.
  • Central bank speaker slate features ECB's de Cos & Makhlouf as well as Riksbank's Ingves.
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