Euro down against the dollar; pound remains flat

The euro fell below the 1.09 mark against the dollar while the pound was virtually unchanged on a day with few major macroeconomic events.

Among currencies, the euro was trading at USD1.0893 versus USD1.0915 on Monday at the close of European stocks while the pound was trading at USD1.3057 from USD1.3057 on Monday evening.

According to ING's Francesco Pesole, "the dollar and oil went in opposite directions yesterday. The greenback was strong across the board, shrugging off a decline in crude that was triggered by some media reports that Israel has no plans to target Iran's oil and nuclear facilities. This is likely the result of some disappointment among investors over the details of China's stimulus measures announced on Saturday."

"As US markets reopen today after a long weekend, the dollar could reconnect with the weaker oil story. Incidentally, the rate picture is unlikely to get much more benign than this for the USD, given that markets are now pricing in just 44bps of Fed easing by year-end and data hasn't improved enough for markets to price that down to just 25bps."

"Should we see more independent dollar outperformance, we might conclude that this is due to some positioning ahead of the US election in three weeks' time. Equity markets appear to be pricing in a Kamala Harris win, which is seen as the least disruptive outcome, and given the candidates' closeness in swing state polls, a defensive positioning could see dollar inflows into the vote," Pesole explained.

Data-wise, things are pretty quiet in the US. The Empire manufacturing index is the only noteworthy release today, and markets will likely be more interested in hearing from FOMC member Mary Daly, who is a neutral figure on the committee and could offer a good idea of ​​where the consensus stands after the higher-than-expected jobs and inflation numbers.

Yesterday, another relatively neutral member, Chris Waller, said that more caution was warranted on rate cuts, which have contributed to the dollar's strength.

On the index front, the dollar was down 0.1% at 103.0, the euro was down 0.2% at 129.0 and the pound was down 0.1% at 130.6.