It's going to be a volatile session for the Australian dollar as the US tariff deadline looms

• The US plans to lift tariffs on $US200 billion worth of Chinese imports at 2:01pm AEST.

• The RBA will release its quarterly Statement on Monetary Policy (SoMP), including updated economic forecasts.

• On the data front, US CPI and UK GDP are the headline acts during the session.

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The Australian dollar remains pressured ahead of possible lift in US tariff on Chinese imports on Friday.

The Reserve Bank of Australia's (RBA) quarterly Statement on Monetary Policy (SoMP) will also be released during the session, an important document that will help to solidify market pricing for possible rate cuts in the months ahead.

Here's the scoreboard at 7am AEST on Friday.

AUD/USD 0.6986 , -0.0002 , -0.03%
AUD/JPY 76.68 , -0.26 , -0.34%
AUD/CNH 4.7760 , 0.0189 , 0.40%
AUD/EUR 0.6230 , -0.0014 , -0.22%
AUD/GBP 0.5371 , 0 , 0.00%
AUD/NZD 1.0603 , -0.0022 , -0.21%
AUD/CAD 0.9414 , -0.0003 , -0.03%

With the exception of the Chinese yuan, the Aussie dollar finished flat to lower against all major crosses, reflecting continued unease among traders that tensions between the US and China could be about to escalate further.

The AUD/USD traded down to as low as .6965 during the session, undermined by steep falls in Chinese stocks and renewed weakness in the Chinese yuan that were driven by uncertainty over progress in trade talks between the US and China along with soft Chinese new bank lending in April.

On Thursday, China's commerce ministry said that it was fully prepared to defend its interests in its trade war with the United States, but acknowledged it hoped the US could resolve its current concerns through dialogue instead of unilateral steps, according to Reuters.

US president Donald Trump did little to appease investor concerns, telling a rally in Florida that China “broke the deal".

The remarks ensured risk assets remained under pressure throughout Asian and European trade.

However, sentiment improved a touch towards the close with Trump revealing he had received a “beautiful letter” from Chinese President Xi Jinping, as trade talks between the two sides resumed in Washington, DC.

“He just wrote me a beautiful letter. I’ve just received it and I’ll probably speak to him by phone,” Trump said. According to Trump, Xi's letter said: “Let’s work together, let’s see if we can get something done.”

That helped markets to erase some of the losses seen earlier in the session, allowing the AUD/USD to lift back towards the .7000 level.

Image: Investing.com

As has been the case throughout this week, headlines relating to trade talks will continue to dominate market movements throughout Friday's trading session.

"China’s Vice Premier Liu is expected to have dinner with US Trade Representative Robert Lighthizer along with other China and US officials, said Rodrigo Catril, senior FX strategist at NAB.

"This cordial arrangement plays to the view that a deal can still be reached, ahead of the scheduled plan to lift China tariffs at 2.01pm AEST.

"Markets will be on the lookout for any soundbites coming out from the meetings and dinner."

Shortly before the tariff deadline expires, the Reserve Bank of Australia (RBA) will release it quarterly Statement on Monetary Policy (SoMP), including updated forecasts on GDP growth, inflation and unemployment.

"Growth and inflation forecasts will be downgraded as indicated in the May monetary policy statement," said analysts at Westpac.

In particular, markets will be interested to see how the RBA still sees underlying inflation moving back to the lower end of its 2-3% target despite suggesting that unemployment will remain around 5% until the end of next year.

The RBA said earlier this week that lower unemployment would likely be required to lift inflation, but the changes it indicated to its forecasts suggest otherwise.

Although developments on the US-Sino trade front will dominated proceedings, there is a little bit of economic data on the way for markets to digest.

The main highlights are US consumer price inflation, Canadian unemployment along with trade, Q1 GDP and industrial production from the UK.