The U.S. dollar was lower on Monday against its rivals as investors shrugged off an upbeat services activity report and focused on mid-term elections this week. The results of the elections may trigger volatility across global markets.
The U.S. dollar index fell 0.24% to 96.31 in afternoon trade.
ISM nonmanufacturing data for October came in at 60.3, which exceeded expectations, but was still below the record-setting level reached last month. The services sector accounts for 80% of private-sector GDP in the United States. Forex traders shrugged off the upbeat report and turned their attention to mid-term elections. The elections are expected to result in a divided Congress.
The elections and the Federal Reserve policy action later in the week has many investors waiting on the sidelines.
The dollar was lower against the yen, falling 0.02% to 113.17 in mid-morning trade. The Canadian dollar was also higher against the U.S. dollar, trading at 1.3084 during the same period.
The euro gained 0.09% to reach 1.1399, as issues with Italy’s budget put pressure on the currency.
Eurozone finance ministers have urged Italy to respond to the European Commission’s demands for a new budget plan after Rome’s spending package was rejected. The commission says the blueprint submitted by Italy’s populist government was not in line with the country’s promise to lower public debt.
Italy has the second-highest debt load in Europe, just behind Greece. If Italy loses control of its finances, many fear that Europe will face financial turmoil.
The Australian and New Zealand dollars were both higher, up 0.24% to 0.7210 and 0.15% to 0.6671 respectively.
The pound was up 0.39% mid-morning, trading at 1.3019.
The pound gained amid optimism that the UK and the European Union will soon reach a deal. John Glen, Britain’s financial services minister, said he is confident that the final deal will give the UK access to the EU markets.
Philip Hammond, British finance minister, has raised the prospect of a looser budget policy after Brexit. Hammond says accelerated growth is the best way to reduce the UK’s debt burden, but the finance minister is still committed to running a budget surplus.
While Hammond has confirmed that the Treasury had not abandoned the prospect or running a budget surplus in the next decade, he has not stated when he expects a surplus.
Hammond believes that boosting sluggish growth is a more viable strategy to reduce debt as a share of GDP than running budget surpluses.