USD Weakens as Trade War Fears Recede, NFP Report Next

Market Reviews

The British pound remains strong and trades as the third strongest on Brexit optimism and hawkish BoE. The pound strengthened after the Bank of England on Thursday kept interest rates unchanged and hinted at slightly faster growth in the future, if Brexit runs smoothly.

Japanese yen is trading as the weakest on for today, and the week too, on strong risk appetite. Meanwhile, US dollar is the second weakest for today as trade war fear recedes. Asian stocks, Australian dollar and New Zealand dollar are lifted by optimism that US-China trade negotiation is having some nice progress. Hong Kong HSI added 2.4%. China Shanghai SSE gained 1.21%. Nikkei and Singapore Strait Times rose 0.81% and 0.73% respectively.

Chinese yuan was boosted by optimism in US-China trade talks. USD/CNH (offshore Yuan), hit as high as 6.9804 this week but it’s now back at 6.9269. And for now, hope is raised for China to defend 7.000 handle for the yuan.

Investors are waiting for a US employment report to get a hint about further pace of the Fed’s rate hikes. Markets are expecting NFP to show 200k growth in October. Unemployment rate is expected to be unchanged at 3.7%. Average hourly earnings are expected to grow 0.2% mom.

On Thursday, US President Donald Trump and Chinese President Xi Jinping expressed optimism about resolving their fierce trade disputes. President Trump said the “discussions are moving along nicely” and meeting is being scheduled at the G20 summit in Argentina. Chinese Premier Li Keqiang also said yesterday that “we do hope that China and the United States will meet each other halfway and work together in the spirit of mutual respect and equality.”

Japanese Prime Minister Shinzo Abe warned that, if economic conditions worsen next year, he will have to listen to opinions and postpone the sales tax increase for a third time, if circumstances so require. For now, he’s still on track to raise sales tax from 8% to 10% in October 2019.

Today’s data showed, that Japan monetary base rose 5.9% yoy in October versus expectation of 6.2%. Australia PPI rose 0.8% qoq, 2.1% yoy in Q3, retail sales rose 0.2% mom in September.