· The dollar fell on Friday as investors took on riskier assets after top U.S. and Chinese leaders said a trade deal between their countries was likely.
Just over a week remains before higher tariffs can be triggered by the expiration of a U.S.-imposed deadline for an agreement. But on Friday, U.S. President Donald Trump and Chinese President Xi Jinping both said significant progress had been made in the trade talks and that a deal was possible in the near future. Xi's message was delivered in a letter to Trump.
Trump also said on Friday that if he saw progress in trade talks with China, he might be inclined to extend negotiations beyond a March 1 deadline, and suggested it was likely the globe's two largest economies would be able to make a deal.
· In afternoon trading, the dollar index was down 0.06 percent at 96.54. The greenback this week has fallen 0.5 percent, after gaining more than 1 percent the previous week, in an uneven performance following mixed U.S. economic data.
The euro was flat against the dollar on Friday. Weak data since January has undermined support for the single currency, which last traded at $1.1334. It hit a two-week high on Wednesday, helped by hopes for an easing of the U.S.-China trade conflict.
· Analysts assessing the euro's prospects are focused on whether a slowdown in European growth is likely to be protracted. A survey on Friday showed business morale fell in February for a sixth straight month in Germany, the mainspring of the European economy.
· U.S. President Donald Trump said on Sunday that he would delay an increase in tariffs on Chinese goods that had been scheduled for Friday, citing “substantial progress” in U.S.-China trade talks over the weekend.
Trump said he would plan a summit meeting with Chinese President Xi Jinping at his Mar-a-Lago estate in Florida to conclude an agreement, assuming both sides make additional progress.
The delay in tariffs was the clearest sign yet of a breakthrough the two sides have sought since calling a 90-day truce in a trade war last year. It will likely be cheered by markets as a sign of an end to the dispute that has disrupted commerce worth hundreds of billions of dollars of goods and slowed global economic growth.
During talks that extended into the weekend, U.S. and Chinese negotiators were discussing on Sunday the thorny issue of how to enforce a potential trade deal after making progress on other structural issues, according to a source familiar with the talks.
The two sides were discussing tariffs on Sunday as well as commodities, the source said.
U.S. officials said on Friday that talks would extend into the weekend after negotiators produced a deal on currency during talks last week.
· U.S. President Donald Trump’s administration appears to be open to seeking a limited deal at this week’s summit with North Korean leader Kim Jong Un, an approach that may yield small but potentially significant results.
It’s unclear how far either side is willing to go, but officials in Washington and Seoul say discussions have included allowing inspectors to observe the dismantlement of North Korea’s Yongbyon nuclear reactor and opening U.S.-North Korea liaison offices.
· Fed's John Williams Warns of Risks of Low Inflation Expectations
Federal Reserve Bank of New York President John Williams voiced concerns that inflation expectations may have slipped downward after years in which price rises have failed to reach the central bank’s 2 percent target.
“We have seen some worrying signs of a deterioration of measures of longer-run inflation expectations in recent years,” Williams said Friday in a speech in New York. “The risk of the inflation expectations anchor slipping toward shore calls for a reassessment of the dominant inflation targeting framework.”
Preliminary data released earlier this month by the University of Michigan showed the five-to-10-year inflation outlook among consumers had slipped to 2.3 percent, matching the lowest on record. Market-based measures have also declined in recent months, with the Fed’s five-year forward break-even inflation rate at 1.8 percent on Feb. 15. It was above 2 percent for most of 2018.
· Fed to keep open mind in review of strategy, tools, Clarida says
The Federal Reserve will keep an open mind as it begins a broad review this year of its monetary policy framework that could result in changes to how it goes about ensuring that prices remain stable and employment plentiful, Fed vice chair Richard Clarida said on Friday.
The Fed will make the results of its review public in the first half of 2020, he said.
· Fed's Bullard says not ready to call for another rate cut: Fox Business
St. Louis Federal Reserve Bank President James Bullard on Friday said he was not expecting another rate cut in 2019, but added that the U.S. Federal Reserve will see how the U.S. economy progresses this year.
“We’ve got inflation well under control here and we don’t need to be preemptive in trying to control inflation going forward,” Bullard said in an interview on Fox Business Network.
· Fed's Quarles: We'd 'quickly reassess' balance sheet plan if problems came up
The Federal Reserve stands ready to change the approach to its balance sheet should conditions warrant, the central bank's vice chair for supervision said Friday.
Fed Vice Chair Randal Quarles said at a conference that the central bank remains committed to its dual mandate of full employment and keeping inflation at a healthy level.
"The normalization of the balance sheet is not a competing goal," he said at the Chicago Booth U.S. Monetary Policy Forum in New York. "If ever it appears that our plans for the balance sheet are running counter to the achievement of our dual-mandate objectives, we would quickly reassess our approach to the balance sheet."
· Brainard Says Fed Must Do More to Boost Diversity in Its Ranks
Federal Reserve Governor Lael Brainard said the U.S. central bank must improve its recruitment of women and people from minority backgrounds because greater diversity leads to better policy decisions.
· Mario Draghi, European Central Bank president, has taken a thinly-veiled swipe at Brexit and populist lawmakers in Rome, saying separation from the EU would deprive businesses and citizens of departing member states of the power to shape the world economic order.
Mr Draghi said that while states might gain independence by quitting the 28 member union and going it alone, they would be likely to lose sovereignty as they would no longer be able to control the course of globalisation.
He said the EU gave member states the capacity “to ensure that globalisation is not a race to the bottom on standards.”
“The EU . . . allows countries to achieve goals that they could not realise alone,” the ECB president said at a speech at the University of Bologna on Friday. “And the EU is able in turn to export some of its standards globally.”
Few European economies were sizeable enough to withstand economic shocks or exert leverage in trade talks. “Co-operating at an EU level increases their potential to do so,” Mr Draghi said.
While the most obvious target for the remarks is the UK, which is set to leave the EU on March 29, Mr Draghi’s defence of the EU’s role in securing free trade was also expected to resonate in Italy, his home country.
· British Prime Minister Theresa May is considering a plan under which Britain's exit from the European Union would be delayed for up to two months, the Telegraph reported here on Sunday.
UK government officials have drawn up a series of options, which were circulated at the weekend, in a bid to avoid resignations by ministers determined to support a backbench bid to take a “no deal” Brexit off the table this week, according to the Telegraph.
Those options include making a formal request to Brussels to delay Brexit if May cannot secure a deal by March 12, the newspaper reported, without citing sources.
· Oil prices touched more than three-month highs on Friday, supported by rising hopes that the United States and China would soon reach a deal to end their trade war, but new record U.S. oil production limited gains.
U.S. West Texas Intermediate crude oil futures ended Friday's session 30 cents higher at $57.26 per barrel, its highest closing price since mid-November. WTI also set a fresh intraday high for 2019 at $57.81 and posted a 3-percent weekly rise.
International Brent crude futures were down 2 cents at $67.05 per barrel around 2:30 p.m. ET, after striking a fresh high of $67.73going back to mid-November. Brent was on track for a weekly gain of about 1.2 percent.
· Traders said prices were lifted by hopes that Washington and Beijing could resolve their trade disputes, which have dented global economic growth.
Reference: CNBC, Reuters, Financial Times, Bloomberg, Business Times
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