Forex: Monday’s review

The euro fell versus the yen and dollar as Italian Prime Minister Silvio Berlusconi faces a budget vote amid pressure to resign, stoking concern the region’s third-largest economy will struggle to manage its debt. Yields on Italy’s 10-year bonds jumped to as high as 6.68 percent, approaching the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts. The rise in Italian yields pushed the spread with the German securities to 491 basis points, also a euro-era record.

The shared currency briefly erased losses versus the greenback as the European Investment Bank told European finance ministers it could boost lending to businesses through banks. Italian government bonds dropped, pushing 10-year note yields to a euro-era high. The euro pared losses earlier after Il Foglio reported Berlusconi may step down and push for early elections. The prime minister later denied the report.

The franc fell after Swiss National Bank President Philipp Hildebrand said the central bank expects the currency to weaken further. Swiss inflation unexpectedly slowed to a negative rate in October, data yesterday showed. Consumer prices decreased 0.1 percent from a year earlier after rising 0.5 percent in September, the Federal Statistics Office in Neuchatel said today. Economists forecast prices to rise 0.2 percent.

Sterling approached its strongest level in a month against the euro as investors sought an alternative investment to the 17-nation currency. The pound gained 0.3 percent to 85.74 pence per euro after rising 2 percent last week, the biggest increase since the five days through Jan. 7. It touched 85.59 cents, after reaching 85.48 on Nov. 1, the strongest since Oct. 4.

EUR/USD: the pair decreased

GBP/USD: the pair has fallen, but  restored losses later.

USD/JPY: the pair traded in range Y78.00-Y78.20.

European data for Tuesday starts at 0700GMT with the German trade balance for September, which is followed by France foreign trade data at 0745GMT. At 0940GMT, Swiss National Bank SNB Board member Thomas Jordan delivers a speech on government debt and monetary policy. Later, at 1900GMT, ECB Executive Board member Juergen Stark delivers a speech at a conference on "the ESRB at 1", in Berlin. UK data includes Manufacturing Output and Industrial Production for September, at 0930GMT. US data starts at 1245GMT with the weekly ICSC-Goldman Store Sales. US data continues at 1355GMT with the weekly Redbook Average and then at 1500GMT with the IBD/TIPP Economic Optimism Index. At 1800GMT, Minneapolis Fed President Narayana Kocherlakota delivers a speech to the South Dakota Chamber of Commerce Economic Outlook Seminar in Sioux Falls.