USD Remains Heavy, Covid Concerns and Brexit in Focus

Another quiet Asia-Pac session, a familiar refrain this week. DXY initially bounced off recent lows hit near the end of the US session, before plumbing new depths as the session wore on. Last slightly lower at 90.992. The greenback shrugged off reports late in the session that Los Angeles implemented a city-wide lockdown stay at home order as Covid cases spiral.

• AUD and NZD US dollar crosses pulled back, AUD briefly caught a bid after reports that China would allow some coal deliveries. AUD/USD last at 0.7406 after touching 0.7419 earlier in the session – its highest level in 28-months. NZD last at 0.7061 after touching 0.7073 earlier in the session.
• Australian data was mixed, trade balance showed a higher than expected surplus as exports rose above expectations, and imports rose but fell short of expectations. Earlier in the session the final readings of the November Services PMI printed above the previous at 55.1 from 54.9, while the composite also eked out a slight rise at 54.9 from 54.7 previously. Building permits rose 8.8% in October against a previous increase of 3.6%, while the AiG Construction Index also rose to 55.3 from 52.7.
• The PBOC fixed USD/CNY at 6.5592, around 9 pips stronger than sell side estimates. This compares to a 39 pip difference yesterday that constituted was the third-largest miss since the PBOC announced that it was phasing out its counter-cyclical adjustment for the fixing in October. Data from China has been positive. Caixin services PMI rose to 57.5 from 55.7, the fourth consecutive monthly rise for the figure, and completes the set of positive surprises in PMI data.
• GBP was the worst performer within the G10 basket on Wednesday, GBP/USD declining -0.4% to 1.3370 at the end of US hours. The pair gained slightly in Asia after BBC reports that a Brexit trade deal may be reached by the end of the week, however optimism borne from the headline was tempered by reports soon after that France told Barnier of veto risks if he capitulates in Brexit talks. GBP/USD last up 0.16% at 1.3386.
• EUR/USD hit 1.2125 before pulling back. EUR seems resilient to reports that Italy will ban movement between regions from December 21 to January 6 due to coronavirus concerns.
• Yen pairs have been quiet, USD/JPY last at 104.47, EUR/JPY last at 126.60.