USD slips and investor risk appetite increase after China’s comments

On Friday, the USD slightly dropped and investor appetite increased, following China’s comments on the need for a lasting solution on trade war tariffs with the US.

The statement raised hopes for phase one deal being reached, boosting investor risk appetite.

Xi Jiping, the Chinese President, said China wanted to work out a deal with the US and was trying to avoid the trade war – but was not afraid to retaliate when necessary.

Another Chinese diplomat urged the US to compromise to develop stable relations between the two countries.

Currencies continued to trade in tight ranges despite trade developments

After a week of mixed signals over a trade deal, events did little to affect the markets. Currencies continue to trade in tight ranges despite the events.

“While there are many trade headlines over the past few days, one can also argue that this is actually a ‘status quo,'” wrote Hao Zhou in a note to clients.

“At the end of the day, there is little progress on trade talks, and it looks like both sides are fine with another delay of the phase 1 deal,” he added in his note.

Hao Zhou is the FX and EM analyst at Commerzbank.

The USD was down less than 0.1% against a basket of other currencies. It broke its three-day streak of gains, heading for its smallest weekly change since the beginning of Aug this year.

The Swiss franc also dropped 02% against the dollar and the euro. The drop suggested market optimism as the Swiss franc is perceived to be a safe-haven currency.

But another safe-haven, the Japanese yen was also flat against the dollar.

New Zealand dollar and the Swedish crown were both up 0.2% against the dollar. The two are trade-exposed currencies.

Lee Hardman, an MUFG currency analyst, wrote in a note that low volatility and tight trading ranges were currently the critical characteristics of the FX market.

German’s GDP data for the third-quarter released earlier this morning held no surprises. The data showed that exports, state spending, and consumers helped the Germany economy avoid a recession.

“Up to now, the slowdown in Germany has been concentrated in the manufacturing sector,” Daria Parkhomenko wrote in a note to clients. 

“Unless global uncertainties are lifted, which are weighing down on the manufacturing sector, it is only a question of when, not if, the weakness in manufacturing spreads to the rest of the economy,” she wrote.

Daria is a forex strategy associate at RBC Capital Markets.

The euro was slightly rose against the weaker dollar.

Flash eurozone PMI data were due at 0900 GMT.