As US and China try to reach a trade deal, China on Friday announced a temporary cut in tariffs on imports from US cars. China's Ministry of Finance has acknowledged that tariff removal is a concrete measure aimed at helping to establish a mutually beneficial china-US trade system. It will remove the additional 25% tariff on US car imports for three months from January 1 and suspend tariffs of 5% on 67 other car parts.
The news provided enough support for the US dollar to weigh on gold despite weak Chinese data released this morning as retail sales registered the slowest pace of growth since 2003. This has raised concerns about slowing growth in the world's largest economy. But that data failed to contribute to the rise in gold thanks to the strength of the green currency.
On the other hand, business growth in the euro area fell to its lowest level in four years in December. The Composite Purchasing Managers Index fell to its lowest level since November 2014 as political uncertainty over UK exit from EU and growing concerns about slowing world economic growth increased. Should the situation continue, the European Central Bank is expected to keep interest rates unchanged at historic lows after yesterday's announcement that the quantitative easing program would end in the first stages of the expansionary monetary policy that the bank has long pursued.
Finally, US retail sales exceeded expectations in November to jump 0.2%, pointing to consumer spending power, helping to reduce fears that economic growth may slow in the coming period as the Federal Reserve continues to raise interest rates. But today's data could be a key supporter of the decision to lift for the fourth time at next week's meeting.
