Asia
Not a surprising start to the week with the market taking a cautionary approach in Asia today. Besides a touch of trade talk headline uncertainty, predictably macro concerns have fallen on Saturday’s headline inflation releases out of China, which was gloomy, to say the least. CPI inflation accelerating well above the PBoC's target of 3.0% coming in at 3.8 % the highest since 2012 and above market expectations of 3.4%, mainly driven by surging pork prices. Non-food CPI inflation remains low, and PPI deflation worsened to -1.6%. But overall positioning does not feel that uncomfortable. Traders hedged against this possible outcome toward the end of last week as soon the Asian FX and equity markets were showing signs of running out of gas.
Currency markets
USD/CNH continues to pare gains breaking above he almighty 7 handle, which is a function of headline uncertainty combined with a dose of economic reality from the domestic inflation data. Other regional currency markets his predictably tagging along for the ride. There are some reported stops above 7 but so far they haven't kicked in suggesting they might be placed more towards 7..02-7.03 level, which was a tough nut to crack on the way down.
The Both commodity and risk-sensitive currencies are coming under a bit of pressure as G-10 traders seek out miss-alignment stories where the focus has fallen on the Canadian dollar as the macro outlook is prone to deteriorate over the next three months after the job market cooled off in October. Indeed, the October meeting was a bit of a way post for the BoC, now admittedly considering a rate cut suggesting their outlook turned poor.
EUR/USD gamma continues to come off even though the spot is testing some interesting levels on the downside. The correlation of EUR/USD and GBP/USD lately has shown EUR/USD is still a decent 'cheaper' proxy for the UK, and topside should perform well for those holding a positive Brexit view outcome. So further back along the curve could see topside perform better into year-end.
Gold
Gold is still struggling for traction despite the weaker China data and increased trade talk uncertainty as underwater gold positions my look to exit on any uptick toward the USD 1475 /oz level given the definitively bearish scrim.
Oil
It feels like we’re stuck in no man's land as everyone is looking for a way out. But oil traders have turned wait and see as to what the next trade talk headline has in store.
UK
Interesting polling numbers in the UK as Conservatives and labour are both gaining in the popular vote to the determent of smaller parties. It appears that the nature of a first-past-the-post system voters are looking make their vote count to block what they may consider being the worst-case outcome.