ASEAN Currencies ,was trade optimism papering over the cracks? And market takes HK bill in stride

It was an intense session in Asia today with headlines driving sentiment, again. Risk tanked on expectations that President Trump would sign the US bill supporting Hong Kong protests. Safe-haven assets were well bid all morning until Bloomberg reported on China top trade negotiator's cautious optimism about reaching a Phase 1 deal with the US. Treasuries shredded earlier gains as e-minis rallied 20 points to regain 3100 levels.

 Asian equities however traded lower across the board as the latest sell-off hasn't likely run deep enough yet to entice aggressive bargain hunting although the markdowns have seemingly abated.

 Senate's passage of the Hong Kong Human Rights and Democracy Act: In the bigger picture, the details of this bill are relatively tame -sanctions against human rights violations isn't new. Also, as we saw with Huawei, the US and China have, in the past, been able to compartmentalize issues from the broader phase one trade negotiations.

Of course, Hong Kong is exponentially more significant than Huawei. Still, China also must be down to earth, realizing that fighting back against this US populist movement, they could lose badly in the global court of public opinion. I’m not suggesting It’s a storm in a teapot, but the market has taken this news well in stride. After all, the HK bill shouldn’t come as a surprise.

 ASEAN currency markets were getting driven more on emotion rather than economic realities, and the market was growing ripe for a reversal. Optimism on US-China trade relations was papering over the cracks in the dreadful China data. 

The walk back on trade deal confidence my have turned currency focus back to the economic realities, and without a domestic growth, trade deal optimism alone is not enough to carry the day.

 Even more telling and despite gnawing macro leverage concerns, China's economic data was terrible enough to trigger the PBoC into action providing a liquidly sugar boost despite the policy scope limiting inflationary concerns.

So, with trade optimism taking a hit, ASEAN currency markets are starting to sag as the economic realities take hold.  I must reiterate however, currency market views have been trading on a 48-72-hour time horizon, so nothing is ever written in stone other than the fact the USD dollar remains in a range.

As for oil and gold, it's either door A or B as both markets remain tethered to the beat of trade talk narrative.  

Picking up from the midday note on the Korean Won perfect storm Kospi shares net sales by foreigners hit KRW573B largest outflows since August 6.