Thursday evening the dollar suffered a sharp bout of weakness in after-hours trading. The euro surged over 1% against the US dollar. There was very little in terms of data or news, so the move was probably exaggerated by lower-than-normal levels of liquidity due to the festive season.
From a geopolitical perspective the re-ignition of tensions between the US and Russia may have contributed to the weakening of the dollar. On Thursday the Obama administration expelled 35 Russian diplomats and their families over alleged Russian hacking during the US election campaign. On Friday the Russian foreign ministry called for the expulsion of 35 US diplomats in a tit-for-tat move. The US also announced sanctions against Russian entities, with the Kremlin promising an ‘appropriate response’.
A quick look ahead
This week we’ll see some data releases of note. The US will announce non-farm payrolls and the December unemployment rate on Friday. There are also key readings on both the service and manufacturing sectors in the US and UK as well as the FOMC minutes from their December meeting.
Markets will keep a close eye on how this plays out, especially as President-elect Donald Trump will be inaugurated on 20th January.