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Sellers are now eyeing counter-trend support guiding the upswing from lows set in mid-November. A daily close below this barrier – now at 1.1328 – would suggest the dominant long-term decline is ready to be reasserted. The first downside hurdle to follow is the November 12 low at 1.1216, followed by a support shelf in the 1.1110-32 zone.

·         The turmoil in the financial markets and the economic slowdown will likely force the US and China towards a trade deal, according to Australia and New Zealand (ANZ) Banking Group.

Trump kicked off a trade war with China in the second quarter of 2018. Since then, both parties have imposed tit-for-tat import tariffs on each other, leading to market instability and heightened fears of a global growth slowdown.

Key points (source: ANZ)

The signs out of the recent trade talks in China are promising and have boosted market optimism, despite the lack of concrete outcomes.

The downside is that commodity markets could feel renewed pressure if a happy middle ground isn't found.

·         North Korea’s lead negotiator in nuclear diplomacy with the United States is expected to hold talks with Secretary of State Mike Pompeo and could also meet President Donald Trump on Friday during a visit aimed at clearing the way for a second U.S.-North Korea summit.

Kim Yong Chol arrived in Washington on Thursday evening for his first visit since he came last June ahead of a landmark meeting between Trump and North Korean leader Kim Jong Un in Singapore. Efforts made since then to get Pyongyang to denuclearize appear to have stalled.

The visit is a sign of potential movement in a diplomatic process that has struggled for months and, according to the source, could yield an announcement of plans for another summit.

·         Bank of Japan Governor Haruhiko Kuroda said he expected trade tensions between China and the United States to be resolved this year, a government official said at a key economic panel on Friday.

·         Germany and China on Friday signed agreements to strengthen coordination in banking, finance and capital markets, and pledged to further open market access and deepen their pragmatic cooperation to broaden economic ties.

Trade between the two nations has softened amid uncertainty caused by the U.S. tariff dispute with China, but both have shown willingness to demonstrate that the world remains multilateral.

FINANCIAL COOPERATION

Both sides recognize the potential of cooperation in the financial sector and are open to financial firms deepening their cooperation in third countries based on commercial criteria.

China and Germany welcome German insurers to set up wholly-owned insurance holding companies in China, and welcome Chinese insurers and reinsurers to conduct reinsurance business in Germany, the statement said.

China also welcomes German banks to apply to become a primary dealer in the open market operations of the People’s Bank of China (PBOC).

The two countries will also support efforts to identify synergies between China’s Belt and Road initiative and the EU’s strategy for linking Europe and Asia, as well as European infrastructure planning.

·         President Donald Trump unveiled a revamped U.S. missile defense strategy on Thursday that called North Korea an ongoing and “extraordinary threat,” seven months after he declared the threat posed by Pyongyang had been eliminated.

The plan, which also detailed concerns about the burgeoning capabilities of Iran, Russia and China, called for developing space-based sensors to detect incoming enemy missiles and exploring space-based weapons to shoot down missiles among other steps to shield the United States.

Trump did not mention the North Korean missile threat in his remarks. But acting U.S. Defense Secretary Patrick Shanahan called North Korea’s missiles a “significant concern.”

“While a possible new avenue to peace now exists with North Korea, it continues to pose an extraordinary threat and the United States must remain vigilant,” the report said.

·         Japan’s annual core consumer inflation slowed to a seven-month low in December as soft household spending kept firms from raising prices, a further sign of the growing challenge faced by the central bank in achieving its elusive 2 percent target.

The data comes ahead of the Bank of Japan’s rate review next week, where the nine-member board is seen cutting its price forecasts and warning of heightening global uncertainties.

The core consumer price index (CPI), which includes oil products but excludes volatile fresh food costs, rose 0.7 percent in December from a year earlier, government data showed on Friday, slowing from the previous month’s 0.9 percent gain.

It fell short of a median market forecast for a 0.8 percent gain and was the slowest pace of increase in seven months.

Some analysts say core consumer inflation may grind to a halt in coming months as recent oil price falls push down gas and electricity bills, which could put the BOJ under pressure to ramp up an already massive stimulus program.

“Even discounting the oil effect, consumer inflation is weak. That’s because the current economic recovery is driven by the corporate sector and the benefits aren’t passed on much to households,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“Consumption isn’t strong enough to convince companies they can raise prices,” he said, adding that core consumer inflation may approach zero percent around April.

·         The United States is likely to extend waivers from sanctions on Iranian oil imports in May but will reduce the number of countries receiving them to placate top buyers China and India and to decrease the chance of higher oil prices, analysts said.

Washington surprised oil markets after granting waivers to eight Iranian oil buyers when the sanctions on oil imports started in November. Benchmark Brent crude futures fell 22 percent that month and the waivers influenced the Organization of the Petroleum Exporting Countries’ (OPEC) decision to agree in December to supply cuts starting in 2019.

Reducing the number of waivers will limit oil exports from Iran, the fourth-largest producer in OPEC, but the United States is unlikely to meet its earlier target of driving Iranian oil exports to zero.

China, India, Japan, South Korea and Turkey are likely to be given waivers after they expire in May that could cap Iran’s crude oil exports at about 1.1million barrels per day, U.S.-based analysts at Eurasia Group said on Thursday. That would remove Italy, Greece and Taiwan from the current waivers list.

“Other geopolitical priorities will moderate the administration’s desire to halt Iranian exports, particularly with Iran’s top two purchasers, China and India,” the analysts said.

“The reductions will probably hit the Iranian economy hard especially because President Hassan Rouhani’s administration is planning its budget around unrealistically high expectations for oil revenue.”

·         Oil prices rose 1 percent on Friday after a report from the Organization of the Petroleum Exporting Countries (OPEC) showed its production fell sharply last month, easing fears about prolonged oversupply.

International Brent crude oil futures LCOc1 were up 62 cents, or 1.01 percent, at $61.80 per barrel at 0753 GMT. Brent has risen about 2 percent this week, its third straight week of gains.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $52.65 per barrel, up 58 cents, or 1.11 percent, from their last settlement.

Reference: Reuters, CNBC