Forex Today: Easing trade tensions lift risk sentiment, UK/US macro data eyed ahead of US-China trade talks

The incoming trade-related headlines continued driving the broader market risk sentiment through the Asian session on Thursday. The safe-haven currencies – like the Japanese Yen and Swiss Franc – gained some traction on reports that the crucial high-level trade talks will finish a day earlier. The South China Morning Post said that the Chinese delegation, led by Vice Premier Liu He, was planning to leave Washington a day early, though CNBC reported that the White House was unaware of any such plans.
 
Meanwhile, a Bloomberg report that the US is considering a currency agreement with China as a part of partial trade deal led to an intraday turnaround in the risk sentiment and forced traditional safe-haven assets to surrender a major part of the early gains. The positive headlines helped trade-sensitive antipodean – the Australian and the New Zealand Dollar – to reverse an early dip to weekly lows and turn higher for the day. The recent price action offers a preview of the market reaction that might follow at the end of the crucial high-level US-China trade negotiations.
 
On the other hand, the US Dollar remained on the defensive amid firming market expectations that the Fed will deliver another interest rate cut at its upcoming policy meeting on October 29-30. Minutes of September FOMC meeting, released on Wednesday, noted that downside risks to the outlook for economic activity has increased somewhat and did little to influence dovish expectations. A weaker tone surrounding the Greenback further helped the shared currency to gain some positive traction and also assisted the Sterling to stage a modest recovery from sub-1.2200 level, or one-month lows tested again on Wednesday.

Main Topics in Asia

US and China make no progress on key trade issues in two days of deputy-level talks – SCMP Sources
 
Conflicting trade talk headlines: White House Spokeswoman claims SCMP is inaccurate, Fox Business say’s its not – CNBC
 
US considering a currency agreement with China as part of partial trade deal – Bloomberg
 
President Trump to allow some sales to China’s Huawei – The New York Times
 
US commerce Secretary Wilbur Ross: China trade practices have gotten worse
 
Brexit headlines centred around a Brexit extension/general election

Key Focus Ahead

Apart from the incoming trade-related headlines, Thursday’s important release of the latest US consumer inflation figures will influence the USD price dynamics and produce some meaningful trading opportunities. From the UK, the release of monthly GDP print along with manufacturing and industrial production figures will play a key role in driving the British Pound. Barring any knee-jerk move, the market reaction to the UK macro data is likely to remain limited amid persistent uncertainties surrounding Britain’s exit from the European Union.
 
EUR/USD: Probing key hurdle on trade optimism, ECB minutes eyed
The pair eked out 0.16% gains in Asia, as the markets offered US Dollars on trade optimism generated by a Bloomberg report stating that the US is planning to enter into a currency agreement with China. Further, The New York Times reported that the Trump administration may issue licenses that will allow some US companies to supply products to China’s Huawei.
 
GBP/USD holds comfortably above 1.2200 mark ahead of UK macro data
Following the previous session’s rollercoaster ride, the GBP/USD pair managed to regain some positive traction on Thursday and was last seen trading around the 1.2225-30 region. Bulls continued showing resilience below the 1.2200 round-figure mark and some renewed US Dollar weakness helped limit any further losses.
 
USD/JPY jumps to over 1-week tops on positive trade-related headlines, lacks follow-through
The USD/JPY pair reversed an early Asian session dip drop to the 107.00 neighbourhood and rallied to over one-week tops in the last hour, albeit quickly retreated few pips thereafter. S sudden pick up on Thursday was triggered by a Bloomberg report that the US is considering entering into a currency agreement with China as a part of a partial trade deal.
 
Gold trims gains as White House dismisses news of US-China trade-talk fallout
Gold is currently trading at $1,512 per Oz, representing 0.30% gains on the day, having hit a high of $1,517 at 22:55 GMT on Wednesday. The yellow metal had picked up a strong bid at lows near $1,505 on reports stating that lack of progress in the US-China trade talks. The risk-off, however, has weakened somewhat in the last few minutes with White House’s spokesperson Judd Deere calling SCMP report inaccurate.