*US growth in laser focus this week
*Phase One set to ink bottom line
*Middle East risk premiums clearly in retreat

Non-farm Payrolls

Slightly under the mark, US December job growth printed 145k against consensus of 160k, while average hourly earnings registered a meagre improvement of 0.1% and unemployment fell unchanged from November at 3.5%. The overall effect saw equity markets dented by Friday close with major US benchmark S&P 500 down over 200pts alongside a broader sell-off in equities, and Gold back up to US$1,560.

However, despite the disappointing result, we think it does little to derail the story of US exceptionalism or stem flows associated with long USD trades over the course of 2020. With US reporting season starting on Jan 14 and US retail sales due out on Thursday, we see upside risks to the week on a string of better corporate results and improved earnings growth. 

US-China trade

Market expectations have clearly priced in a smooth and orderly signing of Phase One come January 15 on Wednesday, with reports suggesting Vice Premier Liu is already on his way to Washington. There appears to be little room for deviation from the expected result as phase one represents a small hurdle in the overall scheme of things, but stranger things have happened. Instead, we think the mammoth task ahead for both parties - and significant tail risk for global sentiment - will again be working through a Phase Two agreement - something Trump has indicated might not complete until after elections.

Geopolitical risk premiums

I'm surprised how quickly US-Iran premiums have been priced out of risk assets, as evidenced by last week's equities brush of all-time highs and anti-risk USDJPY's return to above 109 levels. This is not to say that Middle East tensions have dissipated or will become irrelevant for the rest of 2020, but rather, traders are likely to remain only highly responsive to sufficient developments that indicate severe military escalation by either side. For portfolios, we favour instituting short-term longs across major JPY crosses as Japanese Yen continues to edge lower from the retreat of risk-off bias.