The U.S. dollar fluctuated in choppy ranges overnight as risk events in Europe dominated trader’s attention overnight. Indeed, the greenback only fell modestly against the Euro and the British pound even as European and British stocks rose 2.5% and 1.8%, respectively. The U.S. dollar did strengthen against the Australian dollar after statistics bureau data showed the nation’s trade surplus narrowed more then economists forecast. Meanwhile, the U.S. economic docket remains light. A NFIB Small Business Optimism survey showed the confidence among small companies rose in October for a second month. The index climbed to 90.2, the highest level since June, from September’s 88.9. The data has not had an effect on the direction of the dollar in early trading. Later the IBD/TIPP Economic optimism survey is expected to climb to 41.0 in November from 40.3 the month prior.
The Euro oscillated between gains and losses against the U.S. dollar overnight before Italian Prime Minister Silvio Berlusconi faces a budget vote and amid speculation that Greece is close to forming a national government. Berlusconi denied a report yesterday by Giuliano Ferrara, his former spokesman and now editor of newspaper Il Foglio, who wrote that the premier will step down “within hours.” Berlusconi will likely resign next week in return for support in a vote on austerity and economic-growth measures, Ferrara said in a phone interview after his initial report. Berlusconi faces a confidence vote next week, but his first test is today. A usually uneventful budget vote might show whether Berlusconi maintains a majority in the Parliament to stay in power and implement austerity measures. Meanwhile in Greece, Prime Minister George Papandreou resumed talks with his opposition rival in Athens as they moved closer to agreement on confirming the premier of a Greek unity government. Look for developments in the Euro-zone to affect overall risk sentiment and the direction of many currencies throughout today’s trading session and likely the rest of the week.
The Japanese yen was unchanged against the U.S. dollar overnight as the currency has held on to its losses from Japan’s intervention late last month. Meanwhile, a former Bank of Japan board member Nobuyuki Nakahara argued the central bank should boost monetary easing 10 fold to weaken the yen and preserve an export-led recovery. “The Japanese economy will collapse unless the yen weakens to 100 per dollar,” Nakahara said.
The British pound traded near a one-month high against the Euro but only strengthened modestly against the U.S. dollar even as global equities European equities and American stock futures soared. Britain’s currency received a small boost after a report showed U.K. manufacturing expanded in September more than economists predicted. Factory output in the U.K. increased 0.2% from the previous month, when it fell 0.3%, the Office for National Statistics said today in London.
