US-China headlines nip risk in the bud........>

FOREX: US-China headlines nip risk in the bud

-Asia-Pac and European sessions were largely free of incident, with most majors

trading well within last week's range (despite German Chancellor Merkel

announcing she won't run for the CDU leadership, and therefore the

Chancellorship, at the next election and the UK budget). This allowed markets to

consolidate for much of the day, although any notion of a risk recovery in

equities, yen crosses or AUD was quelled on Bloomberg reports that the US is

planning for another wave of sanctions on Chinese imports should the upcoming

Trump-Xi talks breakdown with no agreement. This dragged USD/JPY from session

highs north of Y112.50 and prompted AUD to sit at the bottom of the G10 table.

-There was far more action in emerging markets, with BRL rallying well over 1%

against most others on right-wing Bolsonaro's election victory and MXN dropping

sharply as the Mexican President scrapped the construction of a new airport,

hinting at a hostile investor environment in the future.

-Tuesday highlights include German regional CPIs and a number of ECB speakers

and RBA's Bullock.