The British pound fell to a two-week low of $1.4069 on Thursday and last stood at $1.4074.
Still, uncertainties on issues ranging from U.S. trade policies to North Korea and Syria kept many investors on hold, and the euro/dollar and the dollar/yen could see one of their narrowest weekly range in months.
Bank of England Governor Mark Carney dampened widespread expectations for an interest rate hike in May on Thursday, pointing out there were also “other meetings” this year.
Disappointing UK retail sales released earlier on Thursday also raised some doubts about the outlook for UK rate hikes.
This week it has moved in a range of only 89 pips, or 0.89 cent, between $1.2414 and $1.2325, which would match the trading range in the holiday shortened first week of January, which was the tightest since August 2014.
The dollar firmed to 107.63 yen, up 0.25 percent on the day and edging near its seven-week high of 107.78 yen touched last week, after U.S. President Donald Trump apparently made no new fresh demands on trade at his meeting with Japanese Prime Minister Shinzo Abe earlier this week.
The 10-year U.S. Treasuries yield hit a one-month high of 2.934 percent as higher oil prices fanned inflation expectations.
· Investors are expecting range-bound trade to continue in the yen, and the euro.
Implied volatilities on dollar/yen options and euro/dollar options have fallen to lowest levels in about three months.
· The European Union’s chief Brexit negotiator Michel Barnier said on Friday some 25 percent of work remained to be done on a pact covering UK withdrawal from the EU, including crucial issues such as management of the Ireland/Northern Ireland border.
Even if Britain and the EU were working towards a British exit from the EU taking place in March 2019, risks of failure remained as long as outstanding topics such as Ireland were unresolved, he said.
· Expectations of a UK interest rate increase in May has shrunk to around 40 percent from 70 percent earlier this week after Bank of England Governor Mark Carney dampened widespread expectations of a hike next month.
Sterling took another leg down on Friday to $1.4060 after falling nearly 1 percent in the New York session after Carney said that a rate hike this year was "likely". GBP=D3
· Japan has warned its G20 counterparts that protectionism and exchange of retaliatory measures will disrupt financial markets and heighten volatility.
“I told my G20 counterparts that no country would benefit from inward-looking policies based on protectionism,” Japan’s Finance Minister Taro Aso told reporters after a dinner gathering of the G20 finance leaders on Thursday.
In a speech to the G20 finance ministers and central bank governors, Aso stressed the need to solve global imbalances under a multilateral, not a bilateral, framework.
· Talks between Japanese Finance Minister Taro Aso and U.S. Treasury Secretary Steve Mnuchin will be based on the view, shared among the international community, that global imbalances should be dealt with multilaterally, not bilaterally, a senior Japanese finance ministry official said on Thursday.
Aso and Mnuchin will meet for bilateral talks on Friday on the sidelines of the G20 finance leaders’ gathering, according to the Japanese Ministry of Finance.
· China will retaliate if the United States insists on initiating a trade war, China’s ambassador to the United States was quoted as saying by the state news agency Xinhua on Friday.
Speaking at an event held by the Fairbank Center for Chinese Studies at Harvard University this week, Cui Tiankai said any dispute should be worked out through dialogue and a trade war would poison the atmosphere of overall China-U.S. relations.
Cui also urged the United States to abandon a cold war and zero-sum mentality, Xinhua reported.
· Oil prices on Friday stayed near three-year highs reached earlier this week, with ongoing OPEC-led supply cuts and strong demand gradually drawing down excess supplies.
Brent crude oil futures LCOc1 were at $73.74 per barrel at 0657 GMT, down 4 cents from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 13 cents at $68.16 a barrel.
Both Brent and WTI hit their highest levels since November, 2014 on Thursday, at $74.75 and $69.56 per barrel respectively. WTI is set for its second weekly gain, climbing more than 1 percent this week, while Brent is also poised to rise for a second week, adding around 1.5 percent.
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