Asian stocks rose across the board on Friday as a report of progress in U.S.-China trade talks stirred hopes of a deal in their tariff dispute and supported risk sentiment. The Wall Street Journal reported on Thursday that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30.
In Currencies the U.S. dollar was little changed on Friday in Asia after trading slightly higher earlier in the day amid optimism of progress in Sino-U.S. trade talks. USDJPY was slightly higher at 109.390 yen after popping up to a two-week high of 109.44 gaining about 0.7 percent against the Japanese currency this week. EURUSD was little changed at $1.1390 after dipping slightly overnight. The common currency was on track for a weekly loss of 0.7 percent. GBPUSD traded nearly flat at $1.2978, in reach of a two-month peak of $1.3001 scaled overnight on the back of hopes that Britain can avoid a no-deal Brexit. British Prime Minister Theresa May’s Brexit deal suffered a heavy defeat in parliament this week, but she survived a subsequent vote of confidence, removing some political uncertainty for now. Still, longer-term prospects for Britain and its markets remained far from clear
Oil extended gains after rising the previous day on a bounce in Wall Street and news that OPEC sharply curtailed production in December. U.S. crude futures added 1.1 percent to $52.65 per barrel. The contracts have gained more than 2 percent this week. Brent crude was up 0.95 percent at $61.76 per barrel and on track to gain roughly 2 percent on the week.
Gold prices remained steady at 1,290.71 an ounce, having relinquished its spot as the most expensive precious metal to palladium early in December.
Geo-political risk will remain the key driver ahead of the weekend, with Brexit and the possibility of a reduction in tariffs on Chinese goods on the table.
The Day Ahead
For the EUR, there are no material economic stats scheduled for release through the afternoon, leaving the EUR in the hands of market risk appetite and sentiment towards the global economy, disappointing earnings figures out of the U.S being overshadowed by trade chatter as the week comes to an end. Trade tariff chatter could be a negative factor for the EUR through the day should Trump threaten Brussels with tariffs on autos, the Eurozone economy in no position to absorb the impact of tariffs on already waning demand.
For the Pound, economic data scheduled for release through the session includes December core retail sales figures. While we can expect the numbers to provide immediate direction for the Pound, focus will remain on Brexit and any updates on talks between Britain and the EU. While Brussels may lack the incentive to offer more favourable terms, in a hope of a new referendum that ends with Britain remaining within the EU, it could back fire should parliament vote any altered deal or even decide to agree to a ‘no deal’ scenario. The EU needs Britain as a trading partner and a lack of a trade agreement would be as punitive to the EU as it would be Britain.