Forex Today: Risk buoyed by trade deal hopes; all eyes on US data

Amid holiday-thinned quiet trading, the market mood was buoyed by fresh hopes of a US-China trade deal after the US President Trump hinted overnight that he would prefer to get a whole deal done with China rather than an interim deal. The Asian stocks rallied while the US equity futures traded with mild gains.

However, the Treasury yields were on the defensive amid increased dovish Fed expectations and ahead of the key US macro releases due later on Friday. Meanwhile, the safe-haven Gold remained depressed below $ 1500 mark.

Amongst the G10 currencies, higher-yielding Antipodeans kept their recovery mode intact, with AUD/USD stuck near-daily tops of 0.6875 while the Kiwi hovers around 0.6400. The anti-risk Yen managed to recover some ground but remains better offered against the greenback near 108.15 region. The USD/JPY pair refreshed six-week highs at 108.26 on trade optimism. The resource-linked Loonie traded on the backfoot amid the recent weakness in oil prices.

Heading into Europe, the EUR/USD pair extends the overnight recovery towards 1.11 handle while the Cable retests 1.2350 despite ongoing Brexit challenges.  

Main Topics in Asia

US-China trade headlines

US Treasury Sec. Mnuchin: Hopeful China trade talks will make progress

US Pres. Trump: Would rather get a whole deal done with china rather than an interim deal

Risk on headlines filtering through supporting global equities

China's Liu He: US-China negotiations will begin next week - China's Global Times

Huawei’s CEO Zhengfei: Would sell 5G know how to address security concerns

Other Headlines

Japan’s Nishimura: Up to the BOJ to decide monetary policy

Japan’s Aso: Japan's economic fundamentals remain solid

IMF: US, China tariffs could lower global GDP by 0.8% in 2020

DUP’s Foster: Won't support Brexit deal dividing internal UK market - Reuters

USD/INR: Indian rupee hits highest since Aug. 14

Key Focus Ahead

After an eventful ECB monetary policy announcement on Thursday, Friday’s EUR calendar remains a thin-showing, with the Spanish CPI and Eurozone Trade Balance (due at 0900 GMT) of note. The UK docket is empty and hence, markets will take cues from the Brexit developments and trade-related headlines for near-term trading opportunities.

All eyes remain on the US calendar, with a host of critical data, including Retail Sales, Import Price Index and Michigan Preliminary Consumer Sentiment Index, which be closely eyed ahead of next week’s FOMC decision. Oil markets will closely follow any updates on the US-Iran geopolitical tensions ahead of the Baker Hughes US Oil Rig Count data at 1700 GMT.

EUR/USD shows signs of bullish turnaround ahead of US Retail Sales data

EUR/USD's daily candlestick arrangement shows an impending bullish reversal. A close above 1.1087 is needed to confirm a bearish-to-bullish trend change. A bullish close may remain elusive if the US data blows past expectations.

GBP/USD: Brexit headlines counter doji ahead of US consumer-centric data

GBP/USD remains in the range despite challenging Brexit headlines. DUP refrains from support altering Irish backstop. US Retail Sales, Michigan Consumer Sentiment Index, trade/political headlines will be the key to watch.

US Retail Sales Preview: Consumer confidence equals sales

Retail sales expected to slip but remain positive in August. Decline to come after strong June and July numbers. Wages and jobs continue to back spending.

US Michigan Consumer Sentiment Preview: Who's got trouble?

Consensus estimate is for limited recovery after August’s large fall. Michigan Survey at odds with the Conference Board number. Labor market backs strong consumption.