Dollar gains vs yen and chf on market optimism, sterling rallies due to hopes of a last-minute Brexit deal

Market Review - 12/10/2019  12:31GMT  

Dollar gains vs yen and chf on market optimism, sterling rallies due to hopes of a last-minute Brexit deal

The greenback ended lower against majority of its peers except vs the Japanese yen and the Swiss franc as expectation of partial US-China trade deal boosted risk appetite. Sterling rallied for second day to 3-month highs after UK's Barclay and EU's Barnier held constructive Brexit talks.  
  
Reuters reported China's foreign ministry said on Friday it hoped China can work with the United States for progress on trade consultations, when asked about trade talks between the two countries.  U.S. President Donald Trump announced a partial agreement on trade with China, specifically on intellectual property, financial services, and huge agricultural purchases.  
  
On the data front, the University of Michigan's preliminary sentiment index advanced to a three-month high of 96 from September's 93.2, data showed Friday. The median estimate of economists was for a decline to 92. The gauge of current conditions climbed to the highest level this year while the expectations index improved.  
  
Versus the Japanese yen, price gained to 108.12 in Asian open before retreating to 107.89 in European morning. However, dollar then rallied to 108.48 ahead of New York open on US-China trade optimism, then a 2-month high of 108.62 in New York morning on upbeat U.S. data together with rising U.S. Treasury yields before easing on profit taking. Price last traded at 108.40 near the close.  
  
The single currency traded with a firm bias in Asia and despite dropping to session lows at 1.1002 in European morning, price rallied in tandem with cable to a near 3-week high of 1.1062 ahead of New York open. Later, euro pared intra-dau gain and retreated to 1.1027 in New York morning on cross-selling in euro especially vs sterling.  
  
The British pound swung wildly in hectic trading. Despite rising to 1.2506 in Europe on continued Brexit optimism, price fell briefly but sharply to intra-day low at 1.2409 on initial comments from EU's Tusk. However, cable swiftly erased its losses and surged to 1.2688 ahead of New York openon reports that UK's Barclay and EU's Barnier had constructive Brexit talks. Athough price retreated to 1.2591 at New York open on profit taking, price  
later hit 3-month highs of 1.2708 before retreating to 1.2641 at the close.  
  
Reuters reported European Council President Donald Tusk said on Friday the latest round of Brexit talks carried no guarantee of success and time was "practically up" - but that even the slightest chance must be used to try to get a deal before Oct. 31.  Speaking in Nicosia, Tusk said he had previously told British Prime Minister Boris Johnson that, unless a workable solution came from London by today, he would announce on Friday that a deal was all but impossible at the Oct. 17-18 summit of all EU leaders.  But he said he had received a positive message from Irish Prime Minister Leo Varadkar that a deal was "still possible" after Varadkar met Johnson on Thursday.    

Reuters reported the Europen Union's Brexit negotiator Michel Barnier said he had had a "constructive" meeting with his British counterpart, Stephen Barclay earlier on Friday.  "Be patient," Barnier told reporters as he left the meeting and went on to brief the 27 EU states staying on together.  "Brexit is like climbing a mountain. We need vigilance, determination and patience."  A UK spokesman also said the Barclay-Barnier meeting had been "constructive".  
  
Data to be released this week :  
  
Japan market holiday, Canada market holiday, China exports, imports, trade balance and EU industrial production on Monday.  
  
China PPI, CPI, Japan tertiary industry index, capacity utilization, industrial production, Swiss producer/import price, France CPI (EU norm) final, 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 on Tuesday.  
  
New Zealand CPI, Italy industrial orders, industrial sales, consumer prices, CPI (EU norm) final, UK DCLG house price index, core CPI, CPI, RPI, core RPI, PPI input prices, PPI output prices, PPI core output, EU trade balance, HICP final, core HICP, U.S. MBA mortgage application, retail sales ex-autos, retail sales, business inventories, NAHB housing market index and Canada CPI, CPI BoC core and core CPI on Wednesday.  
  
Australia employment change, unemployment rate, Swiss trade balance, exports, imports, Italy trade balance, trade balance non-EU, UK retail sales, retail ex-fuel, EU construction output, U.S. building permits, housing starts, initial jobless claims, industrial production, capacity utilization, manufacturing output and Canada manufacturing sales, ADP employment change on Thursday.  
  
Japan national core CPI, national CPI, China industrial output, retail sales, GDP, Germany wholesale price, EU current account and U.S. current account, leading index change on Friday.