The US Dollar Index held near a three-month high on Monday against a basket of major currencies, as investors awaited key economic data this week that is expected to offer only limited insight into the health of the US economy, while reinforcing the Federal Reserve’s cautious stance on monetary policy.

The Fed cut interest rates last week by 25 basis points, as widely expected, but Chair Jerome Powell warned that the move could be the final cut this year, citing risks in proceeding further without a clearer economic picture.

If not for the ongoing US government shutdown, this week’s releases—including the nonfarm payrolls report—could have helped shape that picture. With official data delayed, investors will instead rely on private-sector employment figures from ADP and ISM manufacturing data, though both are seen having only a muted impact on markets.

Several regional Fed presidents voiced discomfort on Friday with the latest easing move, while market bets now point to roughly a 68% chance of another rate cut in December—down sharply from before last week’s meeting.

The Japanese yen fell to 154.1 per dollar, near an eight-and-a-half-month low, weighed down by widening interest rate differentials between Japan and the US. The euro slipped 0.16% to 1.1513, its weakest level in three months, while the British pound dropped 0.3% to 1.3133.

The US Dollar Index, which tracks the greenback against six major peers, rose 0.16% to 99.89—its highest since August 1—after trading within a tight 96–100 range over the past six months.

Lee Hardman, senior currency analyst at MUFG Bank, said, “The focus now is whether the index can break out of this range and whether the current rally is sustainable,” adding that the repricing of more hawkish Fed expectations remains the key driver of dollar strength.

Both the yen and the pound face unique pressures. Although Bank of Japan Governor Kazuo Ueda delivered his strongest signal yet last week of a possible rate hike in December, markets reacted cautiously given the bank’s slow-moving stance, particularly as the Fed turns more hawkish.

These dynamics have intensified pressure on the yen, prompting Japanese authorities to issue verbal interventions to stem the slide. The yen is now approaching levels where the government previously stepped in to support the currency in 2022 and 2024.

Hardman added, “The yen may start to find some support as markets near potential intervention levels, though that alone won’t be enough to change the broader trend.”

The yen also hovered near a record low against the euro, last trading around 177.4 per euro.

Meanwhile, the pound remained weak as expectations rose for another Bank of England rate cut this year following weaker-than-expected inflation data last month. The central bank meets this week, with some analysts anticipating a 25-basis-point cut, though market pricing suggests only a one-in-three chance.

Elsewhere, the Australian dollar edged up 0.1% to 0.6554, supported by expectations that the Reserve Bank of Australia will hold rates steady on Tuesday after a stronger core inflation reading. The US dollar also gained 0.34% against the Swiss franc to 0.8072—its highest since mid-August.

Gold prices rose in European trading on Monday at the start of the week, supported by psychological buying around the $4,000 per ounce level. Gains, however, remained limited as the US dollar extended its rally to a three-month high against a basket of major currencies.

More hawkish remarks from several Federal Reserve officials have dampened expectations for a rate cut in December, as markets await fresh economic data from the United States later this week.

Price Overview

• Gold prices rose 0.65% to $4,028.04 per ounce, up from an opening of $4,002.40, after touching a session low of $3,964.63.

• On Friday, gold fell 0.6%, resuming losses that had paused the day before amid a brief rebound from a three-week low of $3,886.64.

• For October, gold gained 3.75%, marking its third consecutive monthly increase and a new all-time high of $4,381.73 per ounce, driven by safe-haven demand.

US Dollar

The US dollar index rose 0.2% on Monday, extending its gains for a fourth straight session to reach a two-month high of 99.92 points, reflecting continued strength in the greenback.

The dollar’s advance was fueled by renewed demand as a preferred investment, particularly after growing uncertainty about whether the Federal Reserve will deliver another rate cut in December.

US Interest Rates

• Dallas Fed President Lorie Logan said Friday that the Fed should not have lowered rates at its most recent meeting.

• Cleveland Fed President Beth Hammack also opposed last week’s rate cut.

• Atlanta Fed President Raphael Bostic stated Friday that a December rate cut is “not a given.”

• Following these remarks, CME’s FedWatch tool showed market odds of a 25-basis-point rate cut in December falling from 70% to 63%, while expectations for holding rates steady rose from 30% to 37%.

• Investors are closely watching upcoming US economic data and further Fed commentary to reassess these probabilities.

Outlook for Gold

Kelvin Wong, senior market analyst for Asia-Pacific at OANDA, noted that “gold lacks upside momentum due to certain technical factors, while the US dollar remains resilient, weighing on bullion.”

He added that “safe-haven demand has eased at this stage as trade tensions between the US and China have subsided.”

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 1.15 metric tons on Friday, bringing total holdings to 1,039.20 metric tons.

The euro edged slightly higher in European trading on Monday against a basket of major currencies, attempting to recover from a three-month low versus the US dollar amid renewed buying at lower levels.

However, the single currency remains under downward pressure after eurozone inflation slowed in October, easing price pressures on European Central Bank policymakers and reinforcing expectations for an interest rate cut in December.

Price Overview

• EUR/USD rose 0.1% to 1.1538 from an opening level of 1.1528, after touching a session low of 1.1522.

• The euro closed Friday down 0.25% against the dollar — its third consecutive daily decline — hitting a three-month low of 1.1521 following softer-than-expected inflation data.

• For October, the euro lost 1.7% versus the dollar, marking its first monthly decline in three months amid political tensions in France and heightened geopolitical risks in Eastern Europe.

US Dollar

The dollar index slipped 0.1% on Monday, pulling back from a three-month high of 99.84 points, reflecting a pause in the greenback’s rally against major and minor counterparts.

Aside from profit-taking, the dollar eased ahead of key US manufacturing data for October, which could offer fresh clues about economic momentum in the fourth quarter.

European Interest Rates

• Data released Friday showed headline eurozone inflation slowed in line with expectations in October, while core inflation remained steady — reducing pressure on the ECB to maintain a restrictive stance.

• Following the report, money markets raised the probability of a 25-basis-point ECB rate cut in December from 10% to 25%.

• Investors are now awaiting additional economic releases across Europe, along with fresh comments from ECB officials, to reassess the likelihood of near-term policy easing.

The Japanese yen weakened in Asian trading on Monday at the start of the week, resuming losses against the US dollar after a brief rebound on Friday. The currency was once again nearing its eight-month low, pressured by expectations of expansive fiscal stimulus under Prime Minister Sanae Takaichi.

Japan’s new prime minister is reportedly preparing a massive stimulus package aimed at supporting the world’s fourth-largest economy — a move that could further delay the Bank of Japan’s plans to normalize monetary policy or raise interest rates anytime soon.

Price Overview

• USD/JPY rose 0.2% to 154.25 yen from an opening of 153.95 yen, after hitting a session low of 153.94 yen.

• The yen had gained 0.1% against the dollar on Friday, ending a three-day losing streak as it rebounded slightly from an eight-month low of 154.45.

• Aside from technical buying at lower levels, the yen found some support after stronger-than-expected inflation data in Tokyo revived speculation of a potential rate hike in December.

• Overall, the yen fell 4.2% against the dollar in October — its second consecutive monthly loss — following the election of Sanae Takaichi as Japan’s first female prime minister.

New Stimulus Package

According to government sources cited by Reuters, Prime Minister Takaichi is preparing an economic stimulus package likely to exceed 13.9 trillion yen ($92 billion) to help households cope with rising prices and inflation. The final size of the package is still being discussed, and an announcement is expected in early November.

Interest Rate Outlook

• Although Bank of Japan Governor Kazuo Ueda sent his strongest signal yet last week that a rate hike could come in December, markets remain skeptical of the central bank’s gradual approach.

• The probability of a 25-basis-point rate hike in December is holding around 50%.

• Investors are awaiting further data on inflation, unemployment, and wage growth to reassess those odds.

Yen Forecast

Rodrigo Catril, senior FX strategist at National Australia Bank, said: “If we start moving toward the 155 level, we can expect stronger verbal intervention from Japanese authorities — and possibly even a higher risk of direct market action.”

He added: “In reality, this situation underscores one thing — the Bank of Japan cannot afford to wait much longer.”