Sino-U.S. Tensions Weigh On Risk

Fresh signs of further Sino-U.S. frictions bolstered safe haven currencies, allowing JPY & CHF to top the G10 pile at the start to the week. RTRS reported that the Trump administration is planning to impose sanctions on at least a dozen of Chinese officials over the removal of Hong Kong opposition lawmakers. USD/JPY sank through the Y104.00 mark before establishing itself within a tight range around that figure.

• GBP went offered in early trade as duelling Brexit headlines from over the weekend stoked uncertainty. Several pieces suggested that the two sides made progress on fishing rights, but remain far apart on level playing field. Sterling trimmed losses as the Times reported that German Cll'r Merkel & French Pres Macron are willing to soften EU level playing field demands.
• MYR was the worst performer in Asia after Fitch downgraded Malaysia's sovereign credit rating to BBB+ from A- on Friday. TWD and KRW continue to hold around key levels in the absence of any catalysts.
• AUD was fairly quiet, AUD/USD moved in an approximately 15 pip range after coming off highs to end the US session on Friday. AUD shrugged off the news that S&P had lowered the rating of 2 Australian states, the move came as no surprise given the impact of the pandemic.
• The yuan initially continued to strengthen, before giving up the gains on the back of the US sanction headlines, but regained its poise after strong trade balance data. Exports soared above expectations, though imports were weaker than expected which could have negative implications for the domestic economy and capped gains.
• There is little in the way of scheduled events today, with German industrial output & Riksbank Nov MonPol meeting minutes due. Brexit developments will remain under scrutiny, with EU Chief Negotiator Barnier expected to brief EU ambassadors on the state of negotiations before EU Commission Pres von der Leyen phones UK PM Johnson.