Fuelling such expectations was a report from the Wall Street Journal on Sunday that said the United States and China could reach a formal agreement at a summit around March 27 given progress in talks between the two countries.
The Aussie gained as much as 0.57 percent to $0.7118, before giving up some of its gains to $0.7085 following soft business inventories and declines in job advertisements and dwelling approvals.
· The Chinese yuan ticked up 0.20 percent to 6.7030 to the dollar in offshore trade, edging near its 7-1/2-month high of 6.6737 hit last week.
The yuan has been supported since late last month after Washington delayed its self-imposed March 1 deadline for raising tariffs on $200 billion worth of Chinese imports, citing progress in its trade talks with Beijing.
While the trade optimism pushed the dollar lower against most Asian currencies, it helped erase the greenback’s earlier losses against the safe-haven yen, which followed U.S. President Donald Trump’s criticism about Federal Reserve monetary policy and a strong dollar.
· The dollar traded at 111.96 yen, near a 10-week high of 112.08 on Friday. It had dipped to 111.75 yen after Trump’s comments on the Fed.
· The euro stood little changed at $1.1365, with focus on Thursday’s ECB policy meeting.
· EURUSD Technical Analysis
Looking at the 4-hours chart, the pair gained bullish momentum after it broke the 1.1325 resistance and the 100 (red) simple moving average (4-hours). There was also a break above the 50% Fib retracement level of the last decline from the 1.1514 high to 1.1234 low.
However, the upward move was capped by the key 1.1420 resistance area and the 61.8% Fib retracement level of the last decline from the 1.1514 high to 1.1234 low. Besides, there is crucial bearish trend line formed with resistance near 1.1408 on the same chart.
The pair made two attempts to clear the 1.1410-1.1420 resistance area, but it failed. It is currently consolidating below 1.1420, with support at 1.1340 and 1.1325. Should there be a downside break below 1.1325, the pair could start a fresh bearish wave.
On the other hand, a successful break above the 1.1420 resistance area may perhaps open the doors for a sustained upward move towards the 1.1450 and 1.1500 resistance levels.
· The U.S. and China are close to a trade deal that could lift most or all U.S. tariffs as long as Beijing follows through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, two people familiar with the discussions said.
Chinese officials made clear in a series of negotiations with the U.S. in recent weeks that removing levies on $200 billion of Chinese goods quickly was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. That’s the amount the Trump administration imposed after China retaliated against the U.S.’s first salvo of $50 billion in tariffs that kicked off the eight-month trade war.
One of the remaining sticking points is whether the tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor whether China is meeting its obligations, the people said. The U.S. wants to continue to wield the threat of tariffs as leverage to ensure China won’t renege on the deal, and only lift the duties fully when Beijing implemented all parts of the agreement.
· The U.S. and China appear more likely to reach some sort of trade agreement during an expected meeting between their two presidents later this month — but some tariffs would most probably be kept in place, predicted Goldman Sachs in a report on Monday.
"Our base case is that an agreement would leave some US tariffs in place, potentially lifting them in stages as various commitments under the agreement have been met. We nevertheless expect some US tariffs to remain in place into 2020," the U.S. investment bank wrote in the report.
· Three stages
Going forward, the process to reach a trade deal would be expected to occur in three phases, said Goldman.
Most immediately, U.S. and Chinese officials are likely to continue meeting over the next few weeks to work out differences on the outstanding issues.
After that, it will likely progress to stage two, resulting in a Trump and Xi meeting in late March to iron out unresolved issues, said the investment bank.
If the Florida meeting takes place, Goldman predicts that there would be a 75 percent probability that the two presidents will announce a formal agreement of some kind.
The third phase — which would be the most unclear in the outcome — is enforcing of the agreement, where the issue of tariff rates will raise some uncertainty, said Goldman Sachs in its report.
· The United States said on Sunday it was trying to find out if Pakistan used U.S.-built F-16 jets to down an Indian warplane, potentially in violation of U.S. agreements, as the stand-off between the nuclear-armed Asian neighbors appeared to be easing.
Pakistan and India both carried out aerial bombing missions this week, including a clash on Wednesday that saw an Indian pilot shot down over the disputed region of Kashmir in an incident that alarmed global powers and sparked fears of a war.
A Pakistan military spokesman on Wednesday denied Indian claims that Pakistan used F-16 jets.
Pakistan returned the captured Indian pilot on Friday in a high-profile handover Islamabad touted as a “peace gesture”, which appeared to significantly dial down tensions, but both sides remain on high alert.
· President Donald Trump on Saturday renewed criticism of the Federal Reserve and said the U.S. central bank’s tight monetary policy was contributing to a strong dollar and hurting the United States’ competitiveness.
Powell has said he will not be swayed by political pressure and gave a clear assertion of the Fed’s independence in early January when he said that he would not resign even if Trump asked him to do so. That followed reports in mid-December that Trump had discussed with his advisers the feasibility of firing Powell after the Fed raised rates again.
· President Donald Trump said on Sunday the reason he wanted to curb military drills with South Korea was to save the United States hundreds of millions of dollars in costs, and suggested it could also reduce tensions with North Korea.
“That was my position long before I became President,” Trump tweeted days after he and North Korean leader Kim Jong Un failed to reach a denuclearization agreement at a summit in Vietnam. The Pentagon and the South Korean military confirmed on Saturday that they were ending large-scale joint spring exercises.
· Russia is ready to take part in bilateral talks with the United States over the issue of Venezuela, Russia’s foreign minister told his U.S. counterpart late on Saturday.
The situation in Venezuela was the main topic in a phone call between Foreign Minister Sergei Lavrov and U.S. Secretary of State Mike Pompeo that took place on March 2, Russia’s foreign ministry said on its website.
· Oil prices rose on Monday, buoyed by output cuts by producer club OPEC and reports that the United States and China are close to a deal to end a bitter tariff row that has slowed global economic growth.
International Brent futures were at $65.25 a barrel at 0713 GMT, up 18 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $55.94 per barrel, up 14 cents, or 0.3 percent.
“The supply picture looks generally tighter this year,” said energy analysts at Fitch Solutions in a note on Monday, adding they expected Brent to average $73 per barrel in 2019.
Reference: Reuters, CNBC, Daily Fx, Fx Street
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