The US Dollar Index, measuring the greenback against a basket of other major currencies, has started the week unchanged. It was up 0.6 per cent at a close on Friday but was still down 1.5 per cent for the week – near its lowest levels in three years.
We do not anticipate foreign-exchange markets will be particularly buoyant today as the US, China and Hong Kong are on holiday. And with no top-tier data from anywhere else, markets opened where they closed on Friday. The key GBP/USD and GBP/EUR pairs opened at 1.4035 and 1.1305 respectively.
Instead market participants will focus on political developments in the US around Russia’s interference in the US election and the Italian vote in just under two weeks.
Robert Mueller, the Special Counsel investigating any links between the Trump campaign and Russia, last Friday brought charges against 13 Russians and three Russian entities. A 37-page indictment alleges that 80 Russian operatives, funded by a close friend of Russian President Vladimir Putin, worked around the clock to meddle in the 2016 presidential race for the White House, staging rallies in US cities, creating Facebook groups seeking to aggravate political and social divides and targeted swing states. There have been no ties mentioned to Donald Trump, yet the announcement of the charges did lead to a flurry of angry tweets from the US President over the weekend.
Friday was the last day that opinion polls could be published ahead of the 4 March vote in Italy. The final polls predicted that the Five Star Movement would be a runner-up but would fall short of a majority. All the major parties ruled out a grand coalition during their campaigns. And with vote being highly unpredictable and likely to end with a hung parliament, we anticipate months of protracted negotiations. This could destabilise the Eurozone. Especially as it comes so soon after the election in Germany where grand coalition talks were still ongoing months after the vote took place.