US Dollar Main Driver Of Price Action; US Political Accord And FOMC Eyed

The main driver of price action in the Asia-Pac session was the US dollar which resumed its move lower as hopes for a stimulus package increased after Senate Majority Leader McConnell acknowledged Biden as the President-elect and said the Senate would not adjourn for the year without a relief package.

• There was limited price action in JPY pairs; the BoJ Rinban operations were in line with previous purchases while data earlier in the session showed that exports fell more than forecast at -4.2% against an expectation of +0.4%, imports also fell more than expected at -11.1% compared to -9.5% expected. The data was ignored despite the negative implications of weaker global economy (lower exports) and weak domestic demand (lower imports). USD/JPY last at session lows of 103.49, down 18 pips on the day.
• NZD/USD pushed back over the 0.71 handle, last up 20 pips at 0.7108, helped by the resumption of the downtrend in DXY. Earlier in the session the New Zealand Treasury released its half year economic fiscal update. The release initially had little effect on markets but seems to be supporting risk sentiment as the session wears on. The release outlined a slightly more positive case than the previous update. 2020/21 annual average GDP growth is forecast at 1.5% compared to the previous estimate of -0.5%, while the 2020/21 bond programme forecast has been cut to NZD 31.7bn. Forecasts for unemployment were downgraded to 6.9% from 7.8%.
• AUD/USD came off session lows, last flat on the session at 0.7559. Upside has been limited in the pair as tensions between Australia and China continue to simmer. Earlier Australian Trade Minister Birmingham said Australia will approach the WTO to challenge tariffs imposed by China on its barley exports. He added Australia reserve the right to invoke further WTO action against China.
• Bank of Canada Governor Macklem said recent CAD strength against the USD is material and is on their radar, however USD/CAD was unmoved on the news.
• Little by way of Brexit news flow, the FT reported the UK is compiling plans to turn London into a shipping hub that will rival Singapore. GBP/USD moving towards session highs at 1.3460 last.
• The PBOC fixed USD/CNY at 6.5355, 79 pips lower than the previous day and resuming the trend of a stronger yuan, after a weaker fix yesterday.
• Market focus will no doubt be on the FOMC meeting. The Fed are expected to keep rates on hold, some are expecting an increase in asset purchases or a version of operation twist where short term bonds are sold to buy longer term bonds.