The US dollar fell to its lowest level in five weeks on Monday, as investors awaited a series of US labor market data this week that could influence expectations for the Federal Reserve’s monetary easing path.

Traders were also assessing US inflation data released on Friday, a court ruling that deemed most of the tariffs imposed by former President Donald Trump illegal, and the ongoing dispute between the US president and the Federal Reserve over his attempt to dismiss Governor Lisa Cook.

According to the CME FedWatch tool, money markets are now pricing in nearly a 90% probability of a 25-basis-point rate cut in September, and about 100 basis points of easing by the fall of 2026.

Against a basket of currencies, the dollar fell 0.22% to 97.64, after touching 97.534, its lowest since July 28. It had posted a monthly decline of 2.2% on Friday.

The main investor focus will be on Friday’s US nonfarm payrolls report, preceded by job openings data and private sector employment figures.

Analysts said the US economy is no longer outperforming as it did through much of the past decade, which justifies dollar weakness, while further signs of labor market slowdown are expected to reinforce this trend.

Klaus Baader, chief economist at Société Générale, said: “Severe weakness in the economic data may point to a stronger Fed response than markets currently expect, but if the weakness in May and June turns out to be just a statistical mirage, there will be no justification for cutting rates given the near certainty of rising inflation next year.”

Some analysts see a possibility that the Fed could cut rates by 50 basis points later this month.

The euro rose 0.32% to $1.1719, while the British pound gained 0.16% to $1.3525. US markets are closed on Monday for a public holiday.

Political attention is turning to France, where the government faces the possibility of losing a confidence vote over wide-ranging budget cuts. Analysts noted that such risks usually weigh on the currency when there are clear signs of contagion within the eurozone, which does not appear to be the case at present.

Investors are also tracking US trade policy as Washington continues negotiations with key trading partners. Mohit Kumar, economist at Jefferies, said: “We don’t expect the court ruling to have a major market impact, as the case will move to the Supreme Court, which is likely to rule in Trump’s favor.”

The dollar also faced added pressure from concerns about Fed independence, as Trump intensified his campaign to exert greater control over monetary policy. George Saravelos, global head of FX research at Deutsche Bank, said: “Fiscal dominance risks should be more evident, either through higher long-term US inflation expectations or a greater discount on the dollar, but neither has materialized yet.”

“Fiscal dominance” refers to a situation in which central banks are pressured to ease monetary policy in order to help finance large budget deficits.

The dollar was little changed at 147.00 yen after a 2.5% monthly decline in August. The onshore Chinese yuan stabilized at 7.1344, ending a six-day losing streak, after falling to 7.1260 on Friday — its lowest level since Trump’s US election victory in early November 2024.

Lee Hardman, senior FX strategist at MUFG, said: “By setting the daily reference rates at lower levels, the People’s Bank of China signaled that policymakers in Beijing are more comfortable allowing the yuan to strengthen against the US dollar in the near term.”

He added that the move “may reflect that Chinese policymakers are less concerned about downside growth risks in the short term.”

Silver prices rose in the European market on Monday to extend gains for the third consecutive session, surpassing the key psychological barrier of $40 per ounce for the first time since 2011, supported by the current decline in US dollar levels against a basket of global currencies.

With strong current expectations that the Federal Reserve will cut interest rates at its September meeting, global financial markets throughout this week await the release of further key data on the US labor market.

Price Overview

• Silver prices today: Silver rose by 2.55% to ($40.76), the highest since September 2011, from the opening level at ($39.74), and recorded a low of ($39.54).

• At Thursday’s settlement, silver prices gained 1.8% in a second consecutive daily increase, supported by declines in the US dollar and Treasury yields.

• Over the course of August, silver prices rose by 8.25%, marking a fourth consecutive monthly gain, supported by higher expectations of US rate cuts and hopes of improved demand in China, the world’s largest consumer of metals.

US Dollar

The US dollar index fell on Monday by 0.3%, deepening losses for the fifth straight session, hitting a five-week low at 97.54 points, reflecting continued declines in the US currency against a basket of major and minor counterparts.

The US Department of Commerce reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose by 0.2% in July after an unrevised 0.3% increase in June.

This keeps the Federal Reserve on track to resume US monetary policy easing and the widely expected interest rate cut at its next meeting on September 16–17.

US Interest Rates

• In a social media post on Friday, Mary Daly, President of the San Francisco Federal Reserve, reiterated her support for cutting interest rates, citing risks facing the labor market.

• According to the CME FedWatch tool: current market pricing shows an 87% probability of a 25-basis-point rate cut at the September meeting, and a 13% probability of no change.

• Current pricing for the October meeting shows a 94% probability of a 25-basis-point cut, and only 6% for no change.

• To reprice September cut expectations, markets are awaiting a series of key US labor market data: July job openings on Wednesday, US private sector jobs and weekly jobless claims on Thursday, and Friday’s nonfarm payrolls report for August.

Chinese Demand

Industrial activity in China exceeded expectations in August, recording the fastest pace of growth in five months, according to data released by RatingDog in Beijing, in the latest sign of improved economic activity in the world’s largest consumer of metals and commodities.

Gold prices climbed in European trading on Monday, extending gains for the fifth consecutive session and touching their highest level in five months. The metal is now moving closer to breaching the historic $3,500 per ounce threshold, supported by sustained weakness in the US dollar.

Markets are firmly pricing in a Federal Reserve rate cut at the September meeting, with investor attention this week shifting toward key US labor market data for fresh signals on the policy outlook.

Price Overview

Spot gold rose 1.1% to $3,486.15, the strongest level since April 22, after opening at $3,448.27 and hitting a session low of $3,437.17.

On Friday, prices gained 0.9%, marking a fourth straight daily advance, helped by moderate PCE inflation data from the US.

For August, gold rallied 4.8%, its biggest monthly gain since April, driven by heightened Fed easing expectations and concerns over Fed independence amid political pressure from Donald Trump.

US Dollar

The dollar index slipped 0.2% on Monday to a two-week low of 97.66, extending its losing streak to a fifth session as Treasury yields continued to decline. Weakness in the greenback has bolstered demand for dollar-priced bullion.

Commerce Department data on Friday showed the PCE price index rising 0.2% in July, after a 0.3% increase in June, leaving the Fed on course for a widely expected rate cut at its September 16–17 meeting.

Federal Reserve Outlook

San Francisco Fed President Mary Daly reiterated her support for a rate cut in a Friday post on social media, citing labor market risks.

According to CME FedWatch, markets are pricing an 87% chance of a 25 bp cut in September and a 94% chance of another move in October.

Key labor data this week will be decisive, including JOLTS job openings on Wednesday, ADP private payrolls and weekly jobless claims on Thursday, and the August nonfarm payrolls report on Friday.

Analyst Commentary

Matt Simpson, senior analyst at City Index, noted that cautious comments from Fed Chair Jerome Powell helped investors look past the moderate PCE data, keeping the door open for a 25 bp cut this month and fueling optimism for further upside in gold.

The euro rose in European trading on Monday, marking its third consecutive daily advance against the US dollar, supported by sustained pressure on the greenback amid strong expectations of a Federal Reserve rate cut later this month.

Investors are now awaiting Tuesday’s release of key eurozone inflation data for August, which is expected to provide clearer signals on whether the European Central Bank will move ahead with a rate cut in September.

Price Overview

EUR/USD: The euro gained 0.25% to $1.1714, up from the opening level of $1.1685, after touching a session low of $1.1684.

On Friday, the euro closed just 0.1% higher against the dollar, extending its recovery from two-week lows, supported by stronger-than-expected inflation data in Germany, the eurozone’s largest economy.

For August, the euro advanced 2.4% versus the dollar, its seventh monthly gain in the past eight months, driven by diverging expectations between ECB and Fed policy.

US Dollar

The dollar index fell 0.2% on Monday, marking its fifth straight daily loss and hitting a two-week low at 97.66, reflecting continued weakness against a basket of major and minor peers.

Data released Friday showed US core personal consumption expenditures (PCE) rising 0.2% month-on-month in July, in line with expectations. This reinforced market conviction that the Fed will move forward with a widely anticipated rate cut at its September 16–17 meeting. According to CME’s FedWatch Tool, markets are now pricing in an 87% chance of a 25-basis-point cut, up from 63% a month ago.

European Central Bank Outlook

Five sources told Reuters that the ECB is likely to keep rates unchanged in September, though discussions of additional cuts may resume in the autumn if eurozone growth falters.

ECB President Christine Lagarde recently noted in Jackson Hole that the tightening cycle of 2022–2023 did not trigger a recession or sharp unemployment spike as had historically occurred.

Market pricing currently shows less than a 30% probability of a 25-basis-point ECB rate cut in September.

Inflation data from Europe on Tuesday will be pivotal in reshaping market expectations.