The US dollar managed to regain some ground on Thursday following a difficult few days due to political instability.
Over the course of this week, the greenback has experienced significant volatility after the midterm elections which saw the country’s Congress deadlocked between the Democrats and Republicans.
However, things seemed to be looking up for the currency on Thursday. The dollar index, which assesses the performance of the currency compared to international competitors, rose by 0.3% to a level of 96.251 at one stage.
This was a significant rise from its two and a half week low seen earlier in the week, when it scraped 95.678.
The other big hurdle for the dollar was yesterday’s interest rate decision announcement from the Federal Reserve.
The decision-making committee acted as expected, and preserved interest rates at their current level of 2.25%. However, it is believed to be gearing up for another interest rate rise next month.
Over in Europe, the euro suffered in the currency markets following a fresh escalation in the budget row between the EU and Italy.
A forecast from the European Commission suggested that the Italian economy was set to grow at a slower pace than that predicted by the Italian government in the coming two years, which means that budget deficits are likely to be greater than had previously been expected.
As a result of the problems, the euro dropped in value by 0.2% in the EUR/USD pair and reached $1.1404.
Elsewhere in the forex markets, the dollar did manage to secure some gains. It rose against the Japanese yen, where it reached 113.72.
As this week comes to a close for the foreign exchange markets, traders are now likely to begin looking ahead to next week.
Dollar trading may be slow on Monday as banks will shut down in the US for the Veterans Day holiday.
In Europe, however, plenty will be going on. Industrial output surveys from Italy covering September are due out at 9am GMT, and given that the Italian economy has faced plenty of analysis in recent weeks in relation to its budget plans, this release is likely to be scrutinised.
On Tuesday, the German consumer price index for October is due out at 7am GMT. It’s expected to show no year on year change and is expected to hover at 2.5%.
The main event on Tuesday, however, will be the average earnings information for September coming out of Britain at 9.30am GMT – a release which is likely to indicate the overall health of the British economy as it moves towards Brexit.
Looking ahead to Wednesday, preliminary German gross domestic product information for the third quarter of the year is expected out at 7am GMT. This is expected to show a quarter on quarter change from 0.5% to -0.1%.
Preliminary Europe-wide gross domestic product information is due out at 10am. This is forecasted by analysts to show no change from quarter to quarter, where it is expected to hold at 0.2%, or year on year, where it is expected to hold at 1.7%.