Market Review - 10/12/2019  23:46GMT  

Dollar ends lower due to rally in euro and sterling

The greenback ended lower against its G4 peers, except for safe-haven Japanese yen on Tuesday, due to an intra-day rally in the euro and sterling. The single currency rose on upbeat German ZEW data while cabled gained to an 8-1/2 month high on continued optimism of a Conservative majority win in this week's election.  
Versus the Japanese yen, although dollar rebounded from 108.55 in Australia to 108.66 at Asian open and fell to session lows at 108.52 in Europe, price briefly jumped to 108.75 at New York open after the Wall Street Journal reported that the United States and Chinese trade negotiators are planning to delay December tariffs, then higher to session highs at 108.76 in New York afternoon on rising U.S. yields.  
The single currency traded with a firm bias in Asia and gained to 1.1070. Despite retreating to 1.1065 ahead of European open, price rose to 1.1084 in Europe on upbeat German ZEW data and then ratcheted higher to session highs of 1.1097 in New York afternoon before stabilising.

Reuters reported the mood among German investors improved far more than forecast in December, a survey showed on Tuesday, with an unexpected rise in October exports boosting hopes for an upturn in Europe's biggest economy.  The ZEW research institute's monthly index on economic morale among investors rose to 10.7 from -2.1 a month earlier. The reading exceeded even the highest forecast in a Reuters poll of economists, which showed a consensus prediction of 0.0.  
The British pound went through a roller-coaster session. Although cable rebounded to 1.3155 in Asia, then gained to 1.3163 at European open, price briefly fell to session lows at 1.3133. However, renewed buying there lifted the pair to 1.3173 before retreating again to 1.3148 on weak UK GDP data. Price then rallied to an 8-1/2 month high at 1.3215 in New York afternoon on continued optimism that UK Boris Johnson's Conservative Party will win with a majority in this week's election before weakening on profit-taking.  
Reuters reported Britain's economy grew at its slowest annual pace in nearly seven years in October, offering a weak backdrop to Thursday's national election in which both leading parties are promising to boost growth.   The approach of a Brexit deadline and the global economic slowdown hit Britain's factories and construction industry in the month, official data showed on Tuesday.

Gross domestic product rose by 0.7% compared with Otober 2018, the weakest growth since March 2012 when Britain was still trying to shake off the effects of the global financial crisis.   In the three months to October, growth flatlined compared with the previous three-month period, the Office for National Statistics said, as expected by economists in a Reuters poll.   The economy also showed no change in monthly terms, the ONS said, weaker than a median forecast of 0.1% growth in the poll.   The ONS said industrial output fell by 0.7% in the three months to October while Britain's large services sector grew by 0.2%, its weakest increase since June.   
In other news, Reuters reported the U.S. House Judiciary Committee is aiming to vote on articles of impeachment against President Donald Trump no later than Thursday, sources familiar with the matter told Reuters on Tuesday.  
On the data front, Reuters reported U.S. worker productivity fell by the most in nearly four years in the third quarter, the government confirmed, while growth in unit labor costs was not as robust as initially thought.   The Labor Department said on Tuesday nonfarm productivity, which measures hourly output per worker, decreased at a 0.2% annualized rate in the last quarter, the biggest drop since the fourth quarter of 2015.   
Productivity was previously reported to have decreased at a 0.3% pace in the July-September quarter. A rebound in hours, driven by a surge in the volatile self-employed and unpaid family workers component, outpaced output in the third quarter. It grews at an unrevised 2.5% rate in the second quarter. Economists polled by Reuters had expected third-quarter productivity would be revised up to show it falling at a 0.1% rate.   
Data to be released on Wednesday :  
New Zealand retail sales, UK YouGov final MRP poll release, Australia consumer sentiment, Japan corporate goods price, producer price index, Canada capital utilization, and U.S. MBA mortgage applications, CPI, core CPI, real weekly earnings, Federal budget, Fed interest rate decision.  

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