The tit-for-tat $34 billion tariffs between the U.S. and China are in effect from Friday 04:01 GMT. China has said it will not fire the first shot, but will act in response to U.S. tariffs.

Friday brings the US Non-Farm Payrolls report at 12:30 GMT, though despite the high-impact report, market reactions are likely to be muted as broader markets react to the trade tariffs. Even with the jobs numbers coming out, market volume will be low on a holiday-week summer Friday. That will make an already trade-talk-sensitive market susceptible to jawboning from either the U.S. or its allies.

EUR/USD is trading flat-lined around 1.1685, having hit a high of 1.1720 yesterday. The movement was generated by more hawkish European Central Bank expectations and reports suggesting a possible US-Eurozone auto trade deal. The market was buoyed by reports on Thursday that the U.S. would be willing to forego any tariffs on European Union vehicles if the EU lifted duties on American autos. However, the financial markets may turn risk-averse in European and US session and the calm in the EUR/USD could be short-lived, as tariff wars began and the monthly US non-farm payrolls figure is to be released today.

The USD/JPY is trading into 110.70, as markets are currently trading steadily following the tariff deadline. The potential for a worsening schism between the world’s two largest economies is keeping risk appetite at bay, and the USD/JPY pairing is trading tightly as traders await a direct response from China.

The GBP/USD has wound up flat on the week, trading just above the 1.3200 major level just ahead of London’s Friday market opening, and the Sterling is struggling to develop a bullish correction against the dollar after falling into new eight-month lows last week at 1.3049. Friday is a thin showing for the GBP on the economic calendar as the broader market focus is on the US tariffs on China.

Oil prices were under pressure on Friday as traders await China’s reaction on US tariffs. Chinese officials have said earlier that it would retaliate against Trump’s tariffs on Chinese goods and threatened a 25% tariff on U.S. crude imports, which could potentially make U.S. oil uncompetitive in China, forcing its refiners to seek alternative supplies. Also weighing on prices was a ramp up in imports led to an unexpected build in U.S. crude supplies.
Gold’s dull response to US-China trade war makes it more vulnerable to gyrations in the US yields and the US dollar. Should the US non-farm payrolls and wage growth numbers beat estimates, the yellow metal could take a beating.