Market Review - 11/10/2019  00:09 GMT  

Dollar ends lower on U.S.-China trade optimism, sterling rises on Brexit hopes

The greenback ended lower against majority of its peers, except for safe-have yen and chf on progress in U.S.-China trade talks which may delay a U.S. tariff hike scheduled for next week. Sterling rallied across the board on renewed Brexit optimism that a deal could be reached by end of October.  
Versus the Japanese yen, although dollar briefly dropped to 107.04 in Australia after media reported that China Vice Premier Liu He was planning to leave Washington just after one day of trade talks meeting, price erased its losses and jumped to 107.76 after media dismissed such report as well as renewed trade optimism. The pair then retreated to 107.36 in European morning before rising to an 8-day high at 108.01 in New York near the close on rally in U.S. Treasury yields and stocks.  
Reuters reported the United States and China made no progress in deputy-level trade talks held during Monday and Tuesday in Washington, the South China Morning Post reported, citing unnamed sources with knowledge of the meetings.   The Chinese delegation, headed by Vice Premier Liu He, is planning to leave Washington on Thursday after just one day of minister-level meetings, the report said.     
Beijing's negotiating team had previously planned to leave Washington late on Friday, the report added.  Reuters reported the United States is weighing a currency pact with China as part of a partial deal that could see a planned tariff hike next week being suspended, Bloomberg reported on Wednesday, citing people familiar with the talks.   The White House is looking to roll out a formerly agreed currency pact with China as part of what it regards as a first-phase agreement with Beijing, according to the report, which added that it will be followed by further talks on issues like forced technology transfers and intellectual property.   
The single currency traded with a firm bias in Asia and gained to 1.0992 and despite retreating to 1.0984 at European open, price rallied to a 17-day high at 1.1034 before retreating to 1.1003 in New York on cross-selling in euro, especially versus sterling before moving broadly sideways.  
The British pound went through a volatile session. Cable initially rose in tandem with euro from 1.2203 in Australia to 1.2265 in Europe and despite retreating to 1.2216 in New York morning, price found renewed buying and rallied to a 2-week high at 1.2469 on renewed Brexit optimism after British Prime Minister Boris Johnson met with Irish Prime Minister Leo Varadkar before stabilising.  
Reuters reported a Brexit deal could be clinched by the end of October to allow the United Kingdom to leave the European Union in an orderly fashion, Irish Prime Minister Leo Varadkar said after what he called a very positive meeting with Boris Johnson.   With just three weeks to go before the United Kingdom is due to leave the world's biggest trading bloc, it remains unclear on what terms it will leave or indeed whether it will leave at all.   After Brexit descended into a public row between London and Brussels earlier this week, Johnson, the British prime minister, met Varadkar at Thornton Manor in Cheshire on Thursday in a last ditch bid to avert an acrimonious divorce or another delay.   
In other news, Reuters reported top U.S. and Chinese negotiators wrapped up a first day of trade talks in more than two months on Thursday as business groups expressed optimism they might be able to ease a bitter 15-month trade war and delay a U.S. tariff hike scheduled for next week.   
U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer met with Vice Premier Liu He and other senior Chinese officials for about seven hours at the USTR's headquarters near the White House.   "We had a very, very good negotiation with China," U.S. President Donald Trump told reporters after the talks concluded. He reiterated his plans to meet with Liu at the White House on Friday, regarded as a good sign.   A smiling Liu waved to reporters before departing the USTR in a black Cadillac, without answering questions. The two sides were due to meet for a final day on Friday.   
On the data front, Reuters reported U.S. consumer prices were unchanged in September and underlying inflation retreated, supporting expectations the Federal Reserve will cut interest rates in October for the third time this year amid risks to the economy from trade tensions.   The Labor Department said on Thursday the flat consumer price index last month was the weakest reading since January and came as increases in the cost of food and rents were offset by decreases in the prices of energy and used cars and trucks.   The CPI edged up 0.1% in August. In the 12 months through September, the CPI increased 1.7% after advancing by the same margin in August.   Economists polled by Reuters had forecast the CPI nudging up 0.1% in September and rising 1.8% on a year-on-year basis.   
Data to be released on Friday :  
New Zealand manufacturing PMI, retail sales, Germany CPI, HICP, Canada employment change, unemployment rate, and U.S. import prices, export prices, University of Michigan sentiment.  

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