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· The dollar stepped back on Friday after a soft U.S. service sector survey inflamed worries that pressure from U.S. trade disputes with China and other countries could spill over into the broader U.S. economy and eventually tip it into a recession.

The dollar index =USD fell to 98.816, shedding about 0.9% after hitting a 2-1/2-year high this week. It is down 0.3% on the week.

Against the yen, the U.S. currency eased to 106.78 yen JPY=, down 0.15% and having fallen to one-month low of 106.48 in U.S. trade on Thursday.

The euro, which had been dogged by concerns Germany could slip into a recession, rose 0.15% to $1.0980 EUR=, extending its recovery from a near 2-1/2-year low of $1.0879 set on Tuesday.

The common currency has gained 0.34% so far on the week.

· The Chinese yuan will slip by year-end to deeper lows last hit against the U.S. dollar during the 2008 global financial crisis as the authorities nudge the partly managed currency down while the U.S.-China trade war rumbles on, a Reuters poll showed.

With global uncertainties aplenty and a U.S. election year approaching, any possible resolution to the trade war at next week’s talks will be hampered by signs of a weakened yuan. Chinese markets are closed until Oct. 7 for public holidays.

The unemployment rate should be unchanged at 3.7%. Average hourly earnings will rise 0.3% on the month and 3.2% on the year as in August. Average weekly hours will be stable at 34.4.

· President Donald Trump on Thursday called on China to look into former Vice President Joe Biden and his son Hunter, on the eve of restarted trade talks between the two economic superpowers.

Biden’s campaign shot back at Trump, saying he was dishing out a “grotesque choice of lies over truth and self over the country.”

“They should investigate the Bidens,” Trump said. “Likewise, China should start an investigation into the Bidens, because what happened in China is just about as bad as what happened with Ukraine.”

Trump said that “I haven’t” asked Chinese President Xi Jinping to do so, “but it’s certainly something we should start thinking about.”

· France’s budget deficit stood at 123.1 billion euros ($135 billion) at the end of August, compared with a deficit of 97.3 billion euros a year earlier, according to official figures released on Friday.

The INSEE official statistics agency forecast this week that the French economy would maintain a quarterly economic growth rate of 0.3% throughout 2019, as a firm job market would help it cope with an uncertain global economic backdrop.

· Hong Kong’s government is set to ban face masks at protests, media reported on Friday, as it struggles to end months of violent unrest in the Chinese-ruled city.

But even before the new rule was confirmed, protests against it began across the Asian financial hub, with hundreds of office workers wearing masks gathering to march.

Media said Carrie Lam, the city’s Beijing-backed leader, was due to hold a news conference at 3 p.m. (0700 GMT), and the ban on face masks, worn by many protesters to hide their identities, would come into effect at midnight (1600 GMT).

The protesters are angry about what they see as creeping interference by Beijing in their city’s affairs despite a promise of autonomy in the “one country, two systems” formula under which Hong Kong returned to China in 1997.

· Hong Kong leader Carrie Lam on Friday invoked emergency powers and banned face masks, saying the order goes into effect on Saturday, Oct. 5.

Consequences for breaking the ban include up to one year in jail and a fine of $25,000 Hong Kong dollars ($3,187).

· U.S. job growth likely picked up in September, with wages increasing solidly, which could assuage financial market concerns that the slowing economy was teetering on the brink of a recession amid lingering trade tensions.

The Labor Department’s closely watched monthly employment report on Friday will come on the heels of a string of weak economic reports, including a plunge in manufacturing activity to a more than 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016.

With signs that the Trump administration’s 15-month trade war with China is spilling over to the broader economy, continued labor market strength is a critical buffer against an economic downturn. The U.S.-China trade war has eroded business confidence, sinking investment and manufacturing.

· New 25% U.S. tariffs on Italian cheese, French wine, Scotch whisky, British biscuits, Spanish olives and thousands of other European food products will lead to higher prices ahead of the holiday season and cost American jobs, trade groups said on Thursday.

The U.S. Trade Representative’s Office said on Wednesday it was imposing tariffs on hundreds of European products after the World Trade Organization gave the green light to the action in response to EU subsidies on large aircraft.

The Specialty Food Association said in a statement the tariffs would decrease sales and adversely impact U.S employment at 14,000 specialty food retailers and 20,000 other food retailers across the United States. The impact would be “dramatic,” the trade group said.

Higher prices “will hit Americans in the wallet just as the holiday season is approaching,” the group said. “The cheese/charcuterie board that currently cost you $45 will put you back $60 after tariffs. The treats you provide your family to celebrate Thanksgiving and the year-end holidays may become out of reach.”

Single-malt whisky represented over half of the total value of British products on the U.S. tariff list, amounting to over $460 million, according to the Scotch Whisky Association.

· Two Fed policymakers on Thursday signaled they are open to delivering another rate cut after a report showed the growth in the vast U.S. services sector is slowing, but the Fed’s No. 2, speaking late in the day, gave little away on his own thinking.

The Fed “will act as appropriate to sustain a low unemployment rate and solid growth and stable inflation,” Fed Vice Chairman Richard Clarida said in New York, repeating a phrase Fed Chair Jerome Powell has used ahead of meetings when the Fed did cut rates, as well as in June, when it didn’t.

The U.S. consumer and economy are in a “good place,” and the U.S. labor market is “very healthy,” Clarida said. At the same time, risks include slowing global growth, uncertainty over trade, and persistent low inflation overseas, all of which impact the U.S. economy.

“If we wait for weakness in global growth and manufacturing and business investment to seep into other parts of the economy... I think we likely have waited too long,” Dallas Fed President Robert Kaplan told a group in a Houston suburb after that report.

The Fed’s two rate cuts so far this year have reduced the likelihood of a severe downturn, Kaplan said, but have not eliminated it, adding that he has an “open mind” as regards to rate-setting and is watching “extremely carefully” for evidence of broader economic weakness.

“We will go to our next meeting, have a discussion about what’s appropriate, and I’m extremely open-minded to making an adjustment if that’s what the appropriate policy is,” Chicago Federal Reserve Bank President Charles Evans said in Madrid, before the services report.

· The European Union will take retaliatory measures in response to new U.S. tariffs on European goods, Germany’s foreign minister, Heiko Maas, told newspapers in remarks published on Friday.

· India’s dominant services sector slipped into contraction in September as new business orders fell for the first time since early 2018, according to a private survey which also found business optimism at its lowest in 2-1/2 years.

Friday’s survey adds to the deepening gloom around businesses and consumers, underlining the broadening cracks in the economy as growth slipped to six-year low in the April-June quarter

The IHS Markit Services Purchasing Managers’ Index INPMIS=ECI fell to a 19-month low of 48.7 in September from 52.4 in August.

· Japanese Prime Minister Shinzo Abe said on Friday he was determined to meet North Korea’s leader to resolve the issue of Japanese nationals abducted by North Korean agents, maintaining an offer to talk despite the country’s missile launches.

North Korea said this week it had successfully test-fired a new submarine-launched ballistic missile from the sea, to contain external threats and bolster self-defense, ahead of fresh nuclear talks with the United States.

· Japan’s core machinery orders are expected to have fallen for a second straight month in August, a Reuters poll showed on Friday, suggesting weak global demand might force firms to slash investment - one of the few bright spots in a slowing economy.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine month, likely fell 2.5% in August from the previous month, the poll of 17 economists showed. In July, orders contracted 6.6%.

· Oil futures were higher ahead of the weekend but remained on track for large weekly losses on fears that slower global economic growth will hurt fuel demand, even as Saudi Arabia said it has fully restored oil output after recent attacks.

Brent crude oil futures LCOc1 rose 12 cents, or 0.2%, to $57.83 a barrel by 0703 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 9 cents, or 0.2%, to $52.54.

Weak U.S. services sector and jobs growth data on Thursday added to worries about global oil demand and exacerbated fears that a protracted U.S.-China trade war could push the global economy into a recession.

Reference: Reuters, CNBC, FX Street