· The Australian dollar and China’s yuan, often seen as barometers of investor risk appetite, rose on Friday on hopes of progress in U.S.-China trade talks, while optimistic comments from Ireland on Brexit boosted the British pound.
“Investors are ready to celebrate any form of a U.S.-China trade deal, even a limited one,” said FXTM analyst Han Tan.
The Australian dollar was up 0.2% at 0.6776 per U.S. dollar AUD=D3 after rising to a two-week high of 0.6782 overnight.
China's yuan was stable after hitting a three-week high in the Asian trading session of 7.0890 per dollar CNH=EBS.
The safe-haven yen JPY=EBS on the other hand slipped to 108.13 per dollar, its weakest since Oct. 1, as investors' risk appetite improved.
The euro was up slightly at $1.1018 EUR=EBS, not far from the three-week high it reached on Thursday against the dollar, which usually appreciates as a safe-haven currency when trade relationships worsen.
Sterling was up marginally at $1.2455 GBP=D3, just under a two-week high it hit after rising 2% overnight - its largest daily percentage gain in seven months, driven by hopes for a Brexit resolution. Euro/sterling was little changed at 88.445 pence EURGBP=D3.
· EUR/USD Technical Outlook, Will Euro Reverse 4-Month Downtrend?
The Euro has spent most of its time this month so far regaining lost ground against the US Dollar. Now, EUR/USD may be on the verge of clearing the critical descending resistance channel from June – red parallel lines on the chart below. This is ahead of key US-China trade talks at the end of this week, which could drive major volatility in the US Dollar should negotiations collapse and fuel haven demand for the Greenback.
Curiously, the pair closed right on the upper lip of the channel on October 10, leaving behind a wick that offered a sign of hesitation to commit by traders. Supporting the near-term rise in EUR/USD is a rising trend line from the beginning of this month – blue line below. Should the pair make further upside progress, that may pave the way for a retest of September highs – a key psychological barrier between 1.1076 and 1.1110.
Zooming in on the 4-hour chart to get a better idea of near-term price action, upside follow-through above falling resistance has been lacking at the time of this report. That leaves the Euro facing former resistance which may act as new support at 1.0999. A fall through the rising trend line from the beginning of October may invalidate a possible reversal of the dominant downtrend. That exposes the 1.0880 – 1.0898 area.
· Uncertainties surrounding the trade war between the U.S. and China has dimmed Malaysia’s economic growth outlook.
That will make it challenging for Malaysia to reduce its fiscal deficit from around 3.4% of GDP this year to its target of 3% in 2020, Reuters reported Finance Minister Lim Guan Eng as saying.
Several analysts cited a fiscal deficit of 3.1% to 3.2% to GDP as the level that allows the government to spend to boost growth, without abandoning financial discipline in a way that would alarm credit ratings agencies.
One area the government should prioritize is making Malaysia more attractive to companies looking to diversify their supply chains as a result of the ongoing trade war, said economists.
· The White House’s promise to stonewall a congressional impeachment inquiry of President Donald Trump will get an early test on Friday, when the former ambassador to Ukraine is scheduled to testify to House of Representatives investigators.
Marie Yovanovitch, a career diplomat who was abruptly recalled from Ukraine in May, is scheduled to give a deposition to congressional investigators probing Trump in a scandal that has cast a pall over his presidency.
· A U.S.-China currency agreement being floated as a symbol of progress in this week’s trade talks between the world’s two largest economies would largely repeat past pledges by China, currency experts say, and will not change the dollar-yuan relationship that has been a thorn in the side of President Donald Trump.
Such a deal would, however, provide the U.S. Treasury an opportunity to climb down from what currency experts say was a misguided declaration in August that Beijing was a “currency manipulator,” reducing the yuan’s value to gain “unfair competitive advantage in international trade.”
Little is known about the structure of a currency deal that the U.S. Chamber of Commerce said American and Chinese negotiators were working toward on Thursday in their first high-level trade talks since July, but it is widely expected to include a promise from both to sides to refrain from devaluing their currencies to gain a competitive trade advantage.
· China’s exports likely fell at a slightly faster pace in September as softening global demand and U.S. tariffs bit more deeply, while imports shrank for a fifth straight month, suggesting pressure on the economy is increasing, a Reuters poll showed.
More U.S. tariff measures against China are set to take effect on Oct. 15 and Dec. 15, unless the two sides can agree on to de-escalate their protracted trade war in negotiations in Washington this week.
China’s September exports are expected to have fallen 3% from a year earlier, according to the median estimate of 28 economists in the poll, worsening from a 1% drop in August.
Imports, meanwhile, are likely to remain in contraction,
shrinking 5.2% from a year earlier, versus a 5.6% decline in August, the poll showed.
· Japan’s core consumer inflation likely slowed in September to its weakest in over two years, according to a Reuters poll, forecasting an outturn that would put pressure on the central bank to expand its stimulus policy.
The core consumer price index, which includes oil products but excludes volatile fresh food costs, was seen up 0.3% in September from a year earlier after a 0.5% gain in August, the poll of 17 economists, released on Friday, showed.
· Chinese President Xi Jinping and India’s Prime Minister Narendra Modi are expected to agree new security measures along their unsettled border during a summit on Friday, officials said, in an effort to smooth ties ruffled by differences over Kashmir.
· International benchmark Brent crude futures LCOc1 rose as much as 2.3% to $60.46 a barrel and were at $60.13 per barrel, up $1.02, by 0648 GMT.
U.S. West Texas Intermediate (WTI) crude CLc1 futures rose as much as 2.1% to $54.69 a barrel and were at $54.47 per barrel, up 92 cents.
· An Iranian-owned oil tanker was struck by two missiles off the Saudi port of Jeddah on Friday, Iranian state television reported, quoting the National Iranian Oil Company (NIOC) which owns the vessel.
The tanker was set ablaze and suffered heavy damage and was leaking crude about 60 miles (96 km) from Jeddah, according to Iranian media.
The alleged attack is the latest incident involving oil tankers in the Red Sea and Gulf region, and is likely to ratchet up tensions between Iran and Saudi Arabia.
The U.S. Navy’s Fifth Fleet, which operates in the region, said it was aware of media reports about the tanker, but did not have any further information at this time.
Reference: Reuters, CNBC, FX Street, Bloomberg
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