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- AUD supported by WSJ report of White House tariff relief debate.

- But analysts are sceptical that any such relief will be forthcoming.

- And Monday's flurry of Chinese economy figures are a risk to AUD.

The Australian Dollar was tracking global investor sentiment Friday and was lifted by reports that U.S. officials are debating lifting some tariffs on goods imported from China, but a flurry of economic figures due out of the world's second largest economy at the start of next week presents a risk to the Antipodean currency.

Treasury Secretary Steven Mnuchin is arguing the U.S. should lift some tariffs on Chinese goods to enourage the nation's leadership to make long-term concessions in talks to end the so-called trade war between the two countries, according to a report by The Wall Street Journal.

The idea was opposed by U.S. Trade Representative Robert Lighthizer but that didn't stop investors from bidding for the Australian Dollar and other so-called risk assets during the overnight session and into the London morning.

"We doubt the US government will roll back tariffs on China as it would wind back the pressure it is applying to its Chinese counterparts. In any case, President Trump and US Trade Representative Lighthizer have the most influence over trade policy, not the Treasury Secretary, and both the President and the Trade Representative are trade hawks," says Joseph Capurso, a currency strategist at Commonwealth Bank of Australia.

The White House has imposed tarifffs on $250 billion of China's annual exports to the EU, although tariffs on some of those goods will automatically rise from 10% to 25% on March 01 if a deal addressing China's "unfair trading practices" is not reached before then.

Averting the tariff increase is important for the Aussie because the Antipodean currency is underwritten by a mammoth commodity trade with China, whose economy has already been hurt by the "trade war" with the U.S., which has seen the Aussie develope a strong correlation with the Renmimbi.

Chinese officials said earlier this month that talks have so far "laid the foundations for resolving issues" over the coming weeks, encouragine speculation that a deal might be close.

"Markets have swung once again on the nth iteration of the same story published by Bob Davis and Lingling Wei of the Wall Street Journal, who seem to be ‘Mnu-China whisperers’ in the way that Greg Ip used to have an inside angle to the Fed, allegedly," says Jane Foley, an FX strategist at Rabobank.

Above: AUD/USD rate shown at daily intervals.

The AUD/USD rate was quoted -0.03% lower at 0.7188 during the morning Friday after rising more than 50 points during the overnight session. It is now up 2% for the 2019 year-to-date.

Meanwhile the Pound-to-Australian-Dollar rate was quoted -0.22% at 1.8017 and is now down by a total of -0.45% thus far this year. The Aussie was higher against most G10 currencies Friday.

Above: Pound-to-Australian-Dollar rate shown at daily intervals.

"China has officially confirmed that its top trade negotiator Liu He will visit Washington on 30-31 January, catching up with the trade truce deadline on 1 March. As the new round of trade talks is only one week ahead of the Chinese New Year, the Chinese officials might be keen to conclude this round of negotiation with a positive tone," says Hao Zhou, an analyst at Commerzbank "The risk of a no-deal is still on the table."

Both Rabobank's Foley and Commerzbank's Zhou are sceptical there has been any real change in White House thinking about the trade war during recent days. If they are right and the market also has a similar view, then it would explain why the Aussie was trading lower during the London session Friday.

However, Chinese industrial production, retail sales and GDP figures are all due out during the early hours of Monday morning, so uncertainty over what the data will reveal about the economy could also explain why the Australian Dollar stalled at the beginning of the Friday session.

The China Federation of Logistics and Purchasing Manufacturing PMI suggested strongly at the beginning of January that the industrial sector contracted during December, marking the first time the survey has pointed to recessionary conditions for more than two years.

Monday's industrial production figure will cover output from that sector during the final month of the year and the GDP data will cover the final quarter of 2018, which is when tensions over the trade war were at fever pitch, so there's a risk of further negative headlines about the economy next week, which would be bad for the Aussie.

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