UN inaction over North Korean missile tests, UK’s push to get tough on China back risk-off mood

Early Wednesday morning in Asia, headlines concerning North Korea, China and Russia, coming from different sources, suggest further beating of the market sentiment.

Starting with the Financial Times (FT) headlines suggesting the UK’s calls for the world to get tough with China as part of the global trade shake-up. While quoting comments from British international trade secretary  Liz Truss, on Wednesday’s virtual G7 meeting, the FT said, “Truss urged the US to put its weight behind the daunting task of reforming the WTO. But she argued that any reform had to include a tough approach to Beijing.”

Moving on, the AP News conveyed that the United Nations (UN) Security Council took no action after a brief meeting Tuesday on North Korea’s latest ballistic missile tests, the first since U.S. President Joe Biden took office on Jan. 20 and a violation of UN sanctions. The news also said, “Last Friday, the council unanimously adopted a resolution to renew the mandate of U.N. experts monitoring sanctions against the North.”

Elsewhere, Politico came out with the news signaling allegations on Russia for stealing thousands of the US State Department officials’ emails last year, per two anonymous Congressional sources.

FX implications

While chatters over Russia are old and can be considered a second-tier risk to the markets, the UN’s inaction over North Korea’s missile test and the escalation tension between the UK and China should exert additional downside pressure on the sentiment. As a result, the AUD/USD may witness further downside while the US dollar and Treasury yields can have extra upside to look for.

Read: AUD/USD: Bears keep reins around 0.7600, focus on China PMI