China's policy debate

A policy debate in China on how best to address slowing growth deepened on Friday, as analysts urged authorities to boost fiscal stimulus amid rising risks to the world’s second-biggest economy from a bitter trade conflict with the United States. As China’s economic growth slows, it has sparked a debate among government researchers on whether fiscal policy should help to soften the impact of a trade war with the United States. Both countries have already slapped tit-for-tat tariffs on each other’s goods and with no signs of easing in tensions Beijing has already started to loosen monetary conditions. Overall credit growth has slowed in China this year, with off-balance sheet lending, or shadow banking, contracting amid a crackdown on financial risks.

In currencies, the EUR/USD broke below the 1.1600 level as demand for the American currency was exacerbated by weakness in the Pound and commodity-linked currencies. Regarding GBP/USD, worst than expected UK retail sales sent the pair to a fresh 2018 low of 1.2957, with the pair bouncing in the last session, to settle at around 1.3030, compliments to US President Trump criticism to Fed’s policy.

In commodities, Gold prices eased for a sixth straight session on Friday, hovering near a one-year low hit in the previous session, as the dollar traded close to a one-year high. Oil prices edged higher on Friday as comments that Saudi Arabia’s exports would fall in August renewed expectations for a global shortage in crude supplies. Saudi Arabia’s OPEC Governor Adeeb Al-Aama said in a statement that the kingdom expects crude exports to fall by about 100,000 barrels per day in August as it limits excess production. Despite today’s gains, oil prices were set to drop for the week amid trade conflict between the U.S. and China, the world’s two biggest oil users.

For today important economic releases are the Canadian CPI m/m and Core Retail Sales m/m.