Market Review - 14/10/2019  23:59GMT  

Dollar ends higher in thin trading conditions on dampened risk appetite

The greenback gained against majority of its peers on Monday on dampened risk appetite on reports that China wants more talks before signing Trump's 'phase one' deal.   Reuters reported China wants more talks as soon as the end of October to hammer out the details of the "phase one" trade deal outlined by U.S. President Donald Trump before Chinese President Xi Jinping agrees to sign it, Bloomberg reported on Monday, citing people familiar with the matter.  

Beijing may send a delegation led by Chinese Vice Premier Liu He to finalise a written deal that could be signed by the two leaders at the Asia-Pacific Cooperation summit next month in Chile, Bloomberg said.  China wants Trump to also scrap a planned tariff hike in December in addition to the hike scheduled for this week, the report added.  
Versus the Japanese yen, although price gained to session highs at 108.52 in New Zealand, the greenback dropped to 108.21 in Asian morning, then lower to session lows at 108.04 in European morning on doubts over US-China trade deal. Later, the pair pared its losses and staged a rebound to 108.45 in thin trading conditions as U.S. remained closed for Columbus Day.  
The single currency traded sideways in Asia and dropped to session lows at 1.1014 at European open. However, price found renewed buying there and gained to 1.1042 due partly to cross-buying in euro especially vs sterling. Later, euro retreated to 1.1018 in European afternoon on dampened risk appetite.  
The British pound met renewed selling at 1.2645 in New Zealand and dropped to an intra-day low at 1.2517 in Europe on reports that work was still needed on Britain's latest Brexit proposals. However, cable swiftly erased its losses and rallied to an intra-day high at 1.2650 in thin European afternoon before retreating to 1.2536 but only to rise to 1.2607 near the close on renewed Brexit deal hopes.  
Reuters reported talks with the European Union to strike a divorce deal remain constructive but there is still a lot of work to do, British Prime Minister's Boris Johnson said on Monday.  The spokesman said Britain wanted to make progress as quickly at possible but that both sides were under great time pressure with a summit of EU leaders beginning on Thursday.    
U.K. Telegraph reported a Brexit deal appears to be taking shape after sources on both sides of the Channel said a positive day of negotiations had yielded a potential solution to the Northern Irish border problem.   Sources in Brussels and London told The Daily Telegraph there was "cautious optimism" that a narrow path to a deal could now be appearing - a marked shift in tone from the downbeat assessment from the EU's chief negotiator Michel Barnier on Sunday.  
In other news, Reuters reported Bank of England Deputy Governor Jon Cunliffe said on Monday that people should not rule out the possibility that the British central bank might need to raise interest rates after a no-deal Brexit.  "What we do doesn't always get reflected in what people think," Cunliffe said in response to a question after a speech to the Society of Professional Economists, adding that some people had not expected the BoE would raise rates, as it has done, before any Brexit transition deal.  The BoE has previously said that rates might go up or down after a no-deal Brexit, depending on the effect on growth and inflation. But BoE Governor Mark Carney and some other top officials have said they thought it was more likely that rates would be cut in such a scenario.  
On the data front, Reuters reported euro zone industrial production rose in August by more than expected, official estimates showed on Monday, as factories invested more on machinery in a positive sign for the bloc's economic outlook amid a largely gloomy outlook.  The European Union statistics agency Eurostat said industrial output in the 19-country bloc grew in August by 0.4% on the month, above the market consensus of a 0.3% rise  
Data to be released on Tuesday:  
China PPI, CPI, Japan tertiary industry index, capacity utilization, industrial production, Swiss producer/import price, France CPI, UK claimant count, ILO unemployment rate, employment change, average weekly earnings, Germany ZEW economic sentiment, ZEW current conditions, EU ZEW economic sentiment, New Zealand GDT price index and U.S. NY Fed manufacturing index, redbook.  

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