Sterling Hurt By Brexit & Covid-19 Restrictions While Broader Risk Aversion Eases

A risk-off impetus which set the tone for early Asia-Pac trade gradually dissipated, as markets digested news about putting an AstraZeneca's Covid-19 trial to a halt and awaited new catalysts. Initial moves were unwound, with AUD/USD recouping neutral levels after a foray below the $0.7200 mark. JPY remained the best G10 performer, albeit by very slim margins.

• GBP extended its retreat amid lingering Brexit concerns, fuelled by UK Northern Ireland Minister's comment that the country could break international law by ripping up some parts of its withdrawal agreement with Brussels. Further pressure on sterling emerged as the press reported that UK PM Johnson will cap the size of permitted gatherings at six people. Cable attacked its 50-DMA after holding above the level since Jul 1.
• KRW was limited by yesterday's/early doors risk aversion, even as South Korea's unemployment rate printed below expectations. Caveats mattered - a surprise drop in unemployment was driven by people dropping out of the labour market.
• The redback showed little interest in China's in-line inflation data.
• Focus moves to Canadian housing starts, monetary policy decision from the BoC and comments from Riksbank's Floden.