The U.S. dollar gained against the majority of its counterparts as political turmoil in Europe over the weekend led investors to the relative safety of the greenback. Indeed, Greek Prime Minister George Papandreou said he will step down to make way a for a coalition government and Italian Prime Minister faces a budget vote today amid pressure to resign and an unraveling majority in Italy’s lower house of parliament. The U.S. dollar rose the most versus the Swiss franc after Swiss national Bank President Philipp Hildebrand said the central bank expects the currency to weaken further, adding to bets the bank will adjust its cap of 1.20 francs per euro set on September 6th. There is no major economic slated for release today so expect the U.S. dollar to modestly push higher as U.S. equity futures foreshadow a lower open. There is also no data scheduled for Tuesday and only MBA Purchase applications on Wednesday. Weekly jobless claims and import/export prices will round out this week’s economic docket before the Veteran’s day holiday on Friday. With little in the way of risk events in the U.S. this week, expect the U.S. dollar to take its cue from developments across the pond, especially Italy and Greece.
The Euro weakened overnight as Italian Prime Minister Silvio Berlusconi faces an important vote and is under pressure to resign, stoking concern the region’s third-largest economy will struggle to manage its debt load. Italian bond yields pushed higher after Berlusconi’s majority in Italy’s lower house came into question with the defection of two allies to the opposition last week, and after a third quit yesterday. The prime minister reiterated that he was confident he still had a majority. At the same time, Greek Prime Minister George Papandreou resigned his position and announced the formation of a coalition government to secure outside financing to avoid a collapse of the nation’s economy. Former college roommates, Papandreou and opposition leader Antonis Samaras agreed the new Greek Prime Minister will be Lucas Papademos. Meanwhile, German industrial production for September shrank by 2.7% on the month, as opposed to the drop of 0.9% predicted by economists. On the yearly front, production grew by 5.4% since this time last year; markets were prepared for a larger growth of 7.2%. The poor data and the political instability in the region has weighed on the common currency.
The British pound held a tight range against the U.S. dollar but gained for a third day versus the Euro as continued uncertainty surrounding the European debt crisis boosted demand for the sterling for investors seeking European exposure without buying the common currency. The economic docket showed that confidence in the outlook for employment fell for a third straight month in September. A gauge of consumer sentiment about hiring prospects fell for a fourth straight month in October, declining five points to minus 72 from September. A measure of job security fell two points to minus 23.
