The U.S. dollar inched higher on Monday as investors prepared for a wave of delayed economic data now set for release after the government shutdown ended. Markets are hoping the incoming reports will provide clearer direction on the Federal Reserve’s December rate decision.
Reaction to President Donald Trump’s reversal of tariffs on more than 200 food products was minimal. Analysts noted the shift was largely expected as policymakers try to ease cost-of-living pressures.
The British pound remained under strain after Friday’s volatile session, driven by speculation surrounding the UK government’s November 26 budget. Meanwhile, the safe-haven Swiss franc hovered near a one-month high at 0.7941 per dollar, supported by recent turbulence in global stock markets.
Attention this week centers on the upcoming U.S. data releases, especially September’s nonfarm payrolls report due Thursday. Analysts say these figures will be crucial after more than 40 days without fresh economic updates.
Carol Kong, currency strategist at Commonwealth Bank of Australia, said markets were eager for new information and warned that a weak payrolls number could revive expectations of a December rate cut, likely pushing the dollar lower.
Currency movements were muted in early Asian trade on Monday. The euro slipped 0.11% to $1.1607, while the Australian dollar pulled back 0.15% to $0.6527. The New Zealand dollar also eased 0.12% to $0.5673. The U.S. dollar index inched up to 99.37.
Even with signs of slowing in the American economy, investors have scaled back the likelihood of a Fed cut next month, partly due to gaps in key economic data. Markets now price a little over a 40% chance of a 25-basis-point reduction in December, down from above 60% earlier in the month.
Despite this shift, the dollar has not seen a strong rebound. Last week, it fell alongside U.S. stocks and bonds in a broad market selloff. According to Thierry Wizman of Macquarie Group, recent dollar weakness likely reflects traders closing long positions ahead of heightened volatility as delayed data is released over the coming weeks.
Sterling Under Pressure
The pound traded 0.11% lower at $1.3161 on Monday after sharp swings late last week. Investors reacted to reports that Finance Minister Rachel Reeves will not raise income tax rates in the upcoming budget. Markets had expected a tax increase to help address a projected fiscal shortfall, and the news sent government borrowing costs sharply higher on Friday.
Reeves is expected to find tens of billions of pounds to meet her fiscal targets, making the absence of an income tax rise a concern for investors. The euro held near a 2.5-year high against the pound at 88.23 pence.
Carol Kong noted that filling the UK’s budget gap will be harder without an income tax adjustment, increasing worries about the country’s long-term fiscal trajectory.
Elsewhere, the Japanese yen stayed weak near the 155-per-dollar mark, last trading at 154.60. The currency showed little reaction to data confirming that Japan’s economy contracted by an annualized 1.8% in the July–September quarter, marking the first decline in six quarters as U.S. tariffs weighed on exports.
