· The euro edged down to hit a new three-week low against the dollar on Friday as the U.S. currency shone on news that China and the United States had agreed to cancel some tariffs as part of a potential preliminary pact to end their trade war.
The two countries have agreed to roll back tariffs on each others’ goods in a “phase one” trade deal if it is completed, officials from both sides said on Thursday.
Sentiment is likely to remain supportive for the dollar, equities and other risky assets as a de-escalation in the U.S.-China trade war removes a huge risk to the global economic outlook.
However, there is still some scepticism about a trade deal as officials inside and outside the White House have bristled at the notion of giving up punitive tariffs.
The euro fell 0.3% to $1.1016, its lowest since Oct. 15.
Versus the dollar, the yen was near a five-month low and against the Australian dollar the Japanese currency was close to a 15-week low.
The dollar last traded at 98.353 against a basket of its peers on Friday.
Progress in resolving the 16-month-long trade war also supported China’s yuan. In the offshore market, the yuan traded at 6.9834 per dollar, close to a three-month high it jumped to on Thursday. The yuan was set for its sixth straight weekly gain.
· A Sino-U.S. trade war could ease somewhat but wider conflicts between the world’s two largest economies will continue, Lou Jiwei, a former Chinese finance minister, said on Saturday.
“Look at the next development, there could be compromises in the trade war at a certain stage, and we have seen signs of compromising,” Lou, now an official with a body that advises China’s parliament, told an economic forum in Beijing.
Officials from both countries on Thursday said China and the United States had agreed to roll back tariffs already put in place on each others’ goods if a “phase one” deal was concluded, but the idea has been met with opposition from some quarters of the administration U.S. President Donald Trump.
Trump himself, in comments that hit stock prices and the dollar, said on Friday he had not agreed to a tariff rollback.
Washington has adopted a strategy to contain China’s economic rise by preventing the country from climbing up the global value chain, Lou said.
· The U.S. central bank signaled on Friday it may be getting ready to join international peers in incorporating climate change risk into its assessments of financial stability, and may even take it into account when setting monetary policy.
“To fulfill our core responsibilities, it will be important for the Federal Reserve to study the implications of climate change for the economy and the financial system and to adapt our work accordingly,” Fed Governor Lael Brainard said in remarks released at the start of the Fed’s first-ever conference on climate change and economics.
· German Chancellor Angela Merkel’s conservatives and the center-left Social Democrats (SPD) on Sunday broke a deadlock over a higher basic pension for low-income workers, an impasse which had threatened the future of their governing coalition.
The package also includes lower contributions to the public unemployment insurance scheme and the creation of an investment fund to support local high-tech start-ups.
· Most economists are expecting New Zealand’s central bank to cut rates to a record low at its last monetary policy decision of the year on Wednesday after the bank signaled in recent months it was willing to ramp up stimulus if necessary to combat slowing economic conditions.
· Spain’s far-right Vox party more than doubled its number of lawmakers in the country’s fourth national election in four years, which delivered a highly fragmented parliament, according to a near-final tally with more than 95% of the votes counted.
The outcome will require party leaders to be creative, negotiate seriously this time and, for some, swallow their pride.
· The most likely outcome appeared to be a minority Socialist government. The bigger question would be who its allies could be and how long such a government could last in a very fragmented parliament.
· Oil prices pared losses on Friday, ultimately finishing the session higher while also posting a gain for the week. Earlier in the session prices fell more than 1% following comments from U.S. President Donald Trump that he has not agreed to roll back tariffs on China.
Brent crude, the global benchmark, gained 26 cents to settle at $62.56 a barrel, after gaining 0.9% in the previous session. U.S. West Texas Intermediate (WTI) crude gained 9 cents, or 0.2%, to settle at a 6-week high of $57.24.
Prices pared losses in midday trade, after Brent reached a session low of $60.66 a barrel and WTI sank to $55.76 a barrel.
Reference: CNBC, Reuters
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