There were a couple of reports overnight to suggest that some easing in the tensions may start to be seen.
Firstly, comments out of a renowned U.S. infectious disease expert, Dr. Anthony Fauci, he noted that there is no scientific evidence to back the theory that the coronavirus was made in a Chinese laboratory. In addition to not entertaining the alternate theory that the virus was leaked from a laboratory after being brought in from the wild.
Now, these comments follow the big claims from the U.S. government on Sunday, to which saw the U.S. Secretary of State Mike Pompeo claiming that there is "enormous evidence" the coronavirus outbreak originated in a Chinese laboratory, echoing President Donald Trump.
Trump's own intelligence community made an on-the-record statement that no such assessment has been made. Adding that they will be continuing to "rigorously examine" whether the outbreak "began through contact with infected animals or if it was the result of an accident at a laboratory in Wuhan."
Elsewhere, comments citing senior government aide officials, as being picked up by WSJ, noted that the U.S. government will not punish China, as long as they continue to obligate their trade requirements of purchasing U.S. goods as per their phase one deal.
What does this all mean for the market?
There has been a notable bounce in some of the dollar’s peers; AUD, NZD, CAD, GBP, following the safe-haven flow into the USD on Monday. However, the sustainability of this will remain in question, as the risk is still there of this U.S. - China situation potentially escalating. Markets know now how quickly Trump came just change his tone and before you know it China has more tariffs. For this reason, we believe those riskier FX peers still remain vulnerable.
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