Urban studies: Doing research when every city is different 
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Everyone is waiting for Mr Trump's response on the US-China trade deal, especially after China asked for significant tariff rollback as a condition for the "Phase One" deal.
Last Friday, Trump indicated that a full rollback seems unlikely. Yesterday, he toughened his tones and threatened that the tariffs on Chinese goods will be raised substantially if a trade deal can't be reached. "If we don't make a deal, we are going to substantially raise those tariffs," he said. "And that is going to be true for other countries that mistreat us too." Clearly, there remains a huge gap between China the US, which would mean that an interim deal, even if can be reached, is unlikely to fundamentally address the US-China disputes. Trump's threat has clearly brought about a risk-off in the Asian trading session. KRW, a sensitive currency to risk sentiment, weakened by more than 0.5% this morning. USDCNY, in the meantime, has been climbing towards 7.03 mark.
The prospect of tariff rollbacks are now being discussed and current levels of USDCNY appear to be pricing in a good chance of such an outcome.
In terms of outright trades we recalibrate our CNH trades as follow to better reflect current market conditions. Given the sharp decline in USDCNH since we purchased the existing 7.15/7.35 call spread, the option is currently under water (mark-to-market -38bp). We re-strike the structure into an identical expiry (13 March 2020) 7.05/7.15 call spread for additional expenditure of only 7bp in premium; the new strikes are closer to current spot and are also more in line with our current USDCNH forecast profile (7.05 by year end, 7.20 by 2Q’20).
EURCNH front- end volatility has declined as anticipated after the initial press reports of constructive US/China trade talks in Washington last month, and the short mid- December expiry 7.65 – 8.0 strangle is in the money to the tune of 40bp.
We continue to look for additional volatility compression in Asian currencies as constructive cyclical and trade sentiment gains broader acceptance; hence we lock in the profit on the existing strangle and re-strike it into a fresh 2M 7.55 – 7.90 structure, such that the new strikes are better placed to accommodate a continued drip lower in spot. Courtesy: JPM & Commerzbank
