U.S. Dollar Holds Near Three-Month High Ahead of Key Private Sector Data
The U.S. dollar traded slightly higher on Monday, hovering near a three-month peak as investors looked ahead to a series of private sector reports expected to offer fresh insights into the health of the U.S. economy.
At 04:15 ET (09:15 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, rose 0.1% to 99.732, remaining close to its strongest level since August.
Dollar Supported by Fed Outlook
Demand for the dollar strengthened following last week’s Federal Reserve meeting, where policymakers cut interest rates by 25 basis points as widely anticipated. However, comments from Fed Chair Jerome Powell cast doubt on the likelihood of another rate cut before year-end.
Markets have since scaled back expectations for a December cut, now pricing in roughly a 68% chance of another move.
Meanwhile, the ongoing U.S. government shutdown is likely to delay the release of crucial labor market data, including the nonfarm payrolls report and JOLTS job openings. As a result, traders will shift their attention this week to private sector indicators.
Analysts at ING noted that the ISM Manufacturing Index for November will be closely watched, as it includes an employment component. The ADP private jobs report, due Wednesday, is expected to be the biggest market mover of the week, potentially influencing the dollar’s short-term trend.
Euro Weakens Near Three-Month Low
In Europe, the euro traded lower, with EUR/USD down 0.2% to 1.1511, hovering near a three-month low. Recent data showed that Germany’s manufacturing sector continued to struggle in October, while France’s factories also posted weak output at the start of the fourth quarter.
The European Central Bank (ECB) kept interest rates steady at 2% for the third consecutive meeting last week. Policymakers signaled that monetary policy remains in a “good place,” although analysts at ING said that ongoing discussions about low inflation could still open the door to another rate cut.
The British pound also slipped, with GBP/USD falling 0.2% to 1.3123 ahead of this week’s Bank of England policy decision. The central bank is expected to hold rates steady, while political uncertainty surrounding Finance Minister Rachel Reeves’ upcoming budget added additional pressure on sterling.
Yen and Aussie Dollar in Focus
In Asia, the USD/JPY pair edged up 0.1% to 154.20, staying near its highest level since early February. The Bank of Japan kept interest rates unchanged last week, though Governor Kazuo Ueda hinted at the possibility of a rate hike, dependent on wage growth trends.
Meanwhile, the Chinese yuan (USD/CNY) traded slightly higher at 7.1192, after touching a one-year low last week. Private PMI data revealed that China’s manufacturing growth slowed sharply in October, although the sector remained in expansion territory—contrasting with government data that showed contraction.
The Australian dollar (AUD/USD) gained 0.1% to 0.6552, with traders awaiting the Reserve Bank of Australia’s (RBA) policy meeting on Tuesday. The RBA is widely expected to keep rates unchanged but maintain a hawkish stance following stronger-than-expected inflation data in the third quarter.
