Risk sentiment tripped in Asia with equities slipping a touch after a more upbeat US close as participants mulled the implications of another possible vaccine trial setback and China’s ban on Australian coal in its power stations – Forex Market Analysis Today: Risk sentiment slips in Asia.
This sets up another trade war fissure at the most inopportune time in the recovery cycle.
The sell-off wasn’t too bad as we have been down this road before, as safety trumps rushing the vaccine out. Overall, with numerous vaccines in the pipeline, this setback might not be viewed too negatively unless unexplained illness becomes more expensive in other trials.
A point, in fact, oil prices barely blinked. But it makes for poor eye candy as attention will now turn to the start of the Q3 earnings season in the US with today’s releases including, you got it, Johnson & Johnson.
Australian dollar sensitive to Yuan’s downside
AUDUSD is proving ultra-sensitive to CNH downside. In addition to reacting negatively to the recent rally in USDCNH, AUD is underperforming its G10 peers as political fractures are growing between Australia and China after reports that some power stations in China have been told to stop using Australian coal immediately.
British Pound gets support
GBPUSD is well supported, reflecting a combination of US dollar weakness and growing optimism that UK-EU Brexit negotiations will not hit the London Wall ahead of Thursday’s leaders’ summit.
If sufficient progress is made on talks this week to extend negotiations, GBP markets‘ focus could turn to economic risks. These risks are firmly tilted to the downside in the context of wide-sweeping social mobility measures in swathes of Northern England in a three-tier Covid-19 alert system. And of course, the discussions around negative rates.
Forex Market Analysis Today: Risk sentiment slips in Asia