Forex Today: Safe-haven Yen eases on trade optimism, Brexit hopes underpin Sterling

Hopes of progress in the US-China trade talks kept the safe-haven Japanese yen on the defensive and continued benefitting trade-sensitive Australian and the New Zealand Dollar. The British Pound remained well supported by renewed Brexit optimism and the prevalent US Dollar selling bias provided a modest lift to the shared currency during the Asian session on the last trading day of the week.
 
The US President Donald Trump on Thursday characterized the first day of trade talks between the top US and Chinese negotiators as very good and said that he is planning to meet Chinese Vice Premier Liu He on Friday. Adding to this, a White House official said that the talks had gone probably better than expected and raised the possibility of a currency agreement, as a part of partial trade deal this week.
 
Meanwhile, the Sterling was the best-performing major currency on Thursday and posted its largest daily percentage gains since March after Irish Prime Minister Leo Varadkar said that a Brexit deal could be clinched by the end of October. Varadkar said that they have identified a potential path forward on the Irish border issue and how to avoid a hard border, paving the way for the resumption of EU-UK Brexit talks on Friday.
 
On the other hand, the Greenback failed to capitalize on the positive trade-related developments and remained depressed amid increasing odds of further monetary easing by the Fed. Thursday’s softer US consumer inflation figures reinforced market expectations that the Fed will cut interest rates again at its upcoming meeting on October 29-30 and kept exerting some downward pressure on the buck.

Main Topics in Asia

President Trump: China talks went very well today, will continue tomorrow
 
President Donald Trump: We’re going to see if we can make a deal with China
 
President Trump to meet China’s Liu He at 18:45 GMT – White House
 
Brexit: Britain is proposing a “pared-down free trade agreement” to end the Brexit stalemate – Sky News
 
Federal Reserve’s Mester: US is likely to avoid a serious downturn

Key Focus Ahead

In absence of any major market-moving economic releases during the European session on Friday, the incoming headlines from a meeting between Finance Ministers from EU member states might influence the shared currency. Apart from this, Friday’s key focus will be on the resumption of EU-UK Brexit talks, which should act as an exclusive driver of the market sentiment surrounding the British Pound. Later during the early North-American session, the release of Prelim UoM consumer sentiment index from the US and Canadian monthly employment details will be eyed for some impetus. This coupled with any fresh trade-related developments might further contribute towards producing some meaningful trading opportunities on Friday.
 
EUR/USD: Key resistance scaled ahead of Draghi’s speech, US-China trade talks pivotal
The European Central Bank (ECB) President Draghi is scheduled to speak at 09:30 GMT. The outgoing President is expected to reiterate his dovish stance. The EUR, however, may show resilience, as the markets seem to have priced in the ECB’s recent easing. Also, currently the focus is on the dovish Federal Reserve expectations and the US-China trade talks.
 
GBP/USD consolidates overnight strong gains to 2-week tops, just below mid-1.2400s
The GBP/USD pair was seen oscillating in a narrow trading band through the Asian session on Friday and consolidated the overnight upsurge to over 250 pips, triggered by renewed hopes that the UK and the EU can reach a Brexit deal. The British Pound turned out to be the best-performing major currency on Thursday after Irish Prime Minister Leo Varadkar said that a Brexit deal could be clinched by the end of October.
 
USD/JPY adds 20 pips on President Trump’s comments
The demand for the anti-risk Japanese Yen (JPY) weakened on the US President Trump’s positive trade-related talks, allowing USD/JPY to jump by more than 20 pips. President Trump, while speaking at a campaign rally in Minneapolis, said that trade talks with China are going well and that a deal could be reached. President Trump will be meeting Chinese Vice Premier Liu later today.
 
Gold steady below $1500’s as positive case from geopolitics firm-up
Gold is currently supported in the $1,490-$1,496 tight range in Asia, despite an informal confirmation from Trump, speaking at a campaign rally, boasting how well trade talks are going with China. Risk has rallied yet Gold is at a standstill ahead of highly anticipated high-level trade talks later today in Washington when Trump and Vice Premier Lui finally meet.