The euro opened New York at 1.3500 the mid-point for much of the Asian and European sessions. The potential damage to the euro from a no-confidence vote for Italian Prime Minister Enrico Letta was largely balanced by the possible partial shutdown in the U.S. Federal government precipitated by the budget and healthcare dispute between Democrats, Republicans and President Obama.
A quick 15 minute run higher to 1.3532 just after the open was attributed to buying ahead of the eur/gbp fix in London and to a report that 20 Italian senators from Silvio Berlusconi’s People of Freedom Party (PDL) had threatened to break with Berlusconi over his order that the five PDL members of Letta's cabinet resign. The euro spiked to 1.3556 on this news, but immediately reversed and had dropped back to 1.3520 by 10:30 am.
U.S. statistics at 8:30 am may have provided some support for the dollar as Chicago PMI, Milwaukee ISM and the manufacturing survey of the Dallas Federal Reserve were all better than expected, though the employment components of the Chicago and Dallas reports were negative.
After that dip to 1.3520 the euro managed to climb to 1.3545 and traded between there and 1.3530 until the London close. Comments from ECB governing board member Yves Mersch that the European economy is still very fragile had no impact, perhaps negated by his assertion that banks in southern Europe had had so much scrutiny that any large new problems are unlikely. The euro drifted lower in the afternoon to close at 1.3524.
The ECB will meet on rates and other topics on Wednesday with no change expected in monetary policy.