FX Today: US-China trade risks eclipse better China factory data; May’s plan B eyed

Despite stronger Chinese factory activity data, the risk sentiment remained softer across the markets in Asia, as the US-China trade risks resurfaced after the latest US Treasury reported a lack of progress with China on the intellectual property (IP) front. The Aussie stalled its post-Chinese data bounce and traded flat around 0.7170 levels while the Kiwi dropped to 0.6715 levels. Meanwhile, the Yen traded with modest gains, having benefited from the risk-off tone, keeping USD/JPY on the back foot near 109.60. However, broad-based US dollar bullish consolidation amid firmer Treasury yields offered some support to the spot.

Among the related markets, both crude benchmarks ticked higher amid stronger industrial figures from China while gold prices traded at weekly lows near 1280 levels amid positive Asian equities.

Main Topics in Asia

UK PM Theresa May considering amending Good Friday agreement – Daily Telegraph

Brexit saga continues: PM May & Cabinet made no further progress on Irish Backstop

Germany's Maas: Can't see UK-Ireland talks solving Brexit deadlock - Reuters

Japan manufacturers' confidence slips to 2-year low - Reuters Tankan

Chances of RBA rate cut in Dec at coin flip levels - AFR

US-China trade talks: USTR reporting lack of progress on IP front

Australian economic growth to be slowed by headwinds - Reuters poll

China GDP eases to 6.4% y/y in Q4 2018, meets estimates

China NBS Chief Ning: China-US dispute had some economic effect, but is manageable

Brent oil rises to $63.00 on upbeat China factory data

Japan's recession risk has risen from 3 months ago - Reuters poll

Key Focus Ahead

Today’s macro calendar remains quiet, with light trading to persist, as the US traders are out on account of Martin Luther King Jr. day. The European calendar sees the release of the second liner German PPI data at 0700 GMT, followed by the monthly economic report by the German central bank, Bundesbank, around 1000 GMT.

The main focus today will remain on the UK PM Theresa May’s statement on Brexit Plan B, after the Irish backstop talks failed to deliver any further progress over the weekend. The pound could bounce-back towards 1.3000 should PM May ask the EU to extend the Article 50 or announce a second referendum in a bid to steer the UK out of the EU with a deal.

EUR/USD: upside favored on slightly stronger China data

The EUR/USD pair fell to 1.1353 on Friday, a level last seen on Jan. 4, and closed convincingly below the 50-day moving average (MA) for the first time Jan. 3. A close below the key MA is backed by the bearish crossover between the 5- and 10-day MAs.

GBP/USD in a bearish consolidation phase near 1.2870, focus on Brexit, UK jobs

The Cable will remain at the mercy of the Brexit-related headlines and the broader market sentiment, as attention turns towards the UK labor market report due tomorrow at 0930 GMT.

Behind USD Rise and 3 Options for Brexit Plan B

Taking a look at the options for plan B, May really has no choice but to ask the EU for more time, which is why by Monday, Article 50 should be extended.

Gold Price Forecast: snaps four-week winning streak, support at $1,266 could come into play

“…the yellow metal could drop sharply next week – more so, because the range breakdown has happened amid signs of bullish exhaustion - bull failure at $1,300 and overbought readings on the RSI.”