The U.S. dollar strengthened slightly on Monday as investors prepared for a packed week of economic data following the end of the government shutdown. Traders are closely watching the numbers for clues on the Federal Reserve’s upcoming interest rate decision in December.
President Donald Trump’s recent reversal on tariffs for over 200 food products drew little reaction in the markets, as analysts had largely anticipated the move amid rising living costs.
Currency Moves
Sterling remained under pressure after a volatile Friday session, fueled by speculation surrounding the UK government’s November 26 budget. The Swiss franc, which had climbed to a one-month high amid global stock market jitters, pulled back slightly, last trading at 0.7954 per dollar.
In Asia trade, the dollar regained ground, reversing some of last week’s losses. The euro weakened 0.2% to $1.1597, the Australian dollar fell 0.24% to $0.6521, and the New Zealand dollar eased 0.18% to $0.5670. The dollar index, which measures the currency against a basket of peers, rose 0.14% to 99.46.
U.S. Data in Focus
Market participants are bracing for a slew of U.S. releases, including the closely watched September nonfarm payrolls report on Thursday. “We have had a data vacuum for over 40 days,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “Any new information on the U.S. economy will be highly scrutinized. A weaker payroll print could reignite expectations of a Fed rate cut.”
Investors have already scaled back expectations for a December cut, with markets now pricing in just over a 40% chance of a 25-basis-point reduction, down from more than 60% earlier this month.
Sterling Under Pressure
The British pound traded 0.3% lower at $1.3137 on Monday, following Friday’s sharp swings after Finance Minister Rachel Reeves indicated there are no plans to raise income tax rates in the upcoming budget. This surprised markets, which had expected a hike to help fill an anticipated fiscal shortfall.
Against the pound, the euro held near its strongest level in about 2½ years at 88.25 pence. Analysts warn that without tax increases, the UK may struggle to meet its fiscal targets, keeping investor concern high.
Yen and Japan
The Japanese yen hovered near 155 per dollar, with traders on alert for potential intervention by authorities. Japan last intervened in July 2024 when the yen fell to a 38-year low of around 161.96. Monday’s GDP data showed Japan’s economy contracted 1.8% annualized in Q3, largely due to declining exports, but the yen showed little reaction.
Future Outlook
Investors will closely monitor the upcoming wave of U.S. economic data for signs of the Fed’s next move. Currency markets remain sensitive, with potential for sharp swings as fresh information fills the long-standing gap left by the government shutdown.
With information from Reuters.
