The U.S. dollar traded near a three-month high on Tuesday as investors reassessed interest-rate expectations amid growing divisions within the Federal Reserve, while the British pound slipped after Finance Minister Rachel Reeves warned of “difficult choices” in her upcoming budget.

Markets turned broadly risk-averse, with equities falling, demand for government bonds rising, and traditional safe-haven currencies such as the yen and the Swiss franc holding firm.

Data gap leaves Fed and investors in the dark

Fed officials continued to issue mixed signals on the economic outlook and inflation risks as the ongoing U.S. government shutdown keeps key data releases on hold.

The central bank cut rates last week as expected, but Chair Jerome Powell cautioned that another reduction in December was “not a foregone conclusion.” According to CME’s FedWatch tool, traders now price a 65% chance of a December cut, down from 94% a week ago.

That shift supported the dollar, with the dollar index—tracking the currency against six major peers—rising above 100 for the first time since early August before settling near 99.82.

The pound fell 0.61% to $1.3057 after Reeves outlined fiscal headwinds including high debt, weak productivity, and persistent inflation. Michael Brown, senior market analyst at Pepperstone, noted that “sterling is repricing lower amid another round of strong headwinds to growth.”

The pound also weakened against the euro, which gained 0.3% to 87.98 pence, while the euro eased 0.2% versus the dollar to $1.149, close to a three-month low.

With risk appetite subdued, the Australian dollar declined 0.7% to $0.6495 after the Reserve Bank of Australia left rates unchanged at 3.60%, warning of possible further easing ahead.

U.S. government shutdown continues

As official data releases remain suspended, investors focus on private-sector indicators such as ADP employment data. The ISM manufacturing survey released Monday painted a grim picture, showing factory activity contracting for an eighth straight month in October amid weak new orders.

Powell’s cautious tone on December easing, combined with the Bank of Japan’s decision last week to keep rates unchanged, has supported the yen in recent sessions.

On Tuesday, the yen rose 0.4% to 153.56 per dollar after earlier touching its strongest level in eight and a half months. Finance Minister Satsuki Katayama reiterated that Tokyo is “closely monitoring” currency moves, as the yen nears levels that previously prompted interventions in 2022 and 2024.

President Donald Trump, who recently visited Japan, has repeatedly criticized countries for keeping their currencies weak to gain trade advantages—a stance that analysts say could make Japanese officials more cautious about direct action.

Jane Foley, head of FX strategy at Rabobank, commented, “Japan’s Ministry of Finance is among the most vigilant on currency stability in the G7. The new administration values its relationship with President Trump and is unlikely to risk that by pursuing policies that sharply weaken the yen.”

Silver prices fell in European trading on Tuesday, extending losses for the third consecutive session as most metal and commodity prices declined under pressure from a broadly stronger U.S. dollar against a basket of major currencies.

The white metal also came under pressure after weak industrial data from China renewed concerns about physical demand in the world’s largest consumer of metals.

Price Overview

• Today’s prices: Spot silver fell 1.25% to $47.49 an ounce, down from the opening level of $48.09, after touching an intraday high of $48.23.

• On Monday, silver lost about 1.2%, marking its second consecutive daily decline.

U.S. Dollar

The U.S. Dollar Index rose about 0.2% on Tuesday, extending gains for the fifth straight session to a three-month high of 100.05 points, reflecting continued strength in the greenback against both major and minor currencies.

The dollar’s rise came as investors favored it as the most attractive asset in the current environment, amid growing uncertainty over whether the Federal Reserve will proceed with another rate cut in December, following a series of hawkish comments from policymakers.

The Fed lowered interest rates last week for the second consecutive time, but Chair Jerome Powell indicated that this could be the last cut of the year.

Chinese Demand

In Beijing, data released earlier this week showed a sharper-than-expected slowdown in industrial activity during October, renewing concerns about the pace of recovery in the world’s second-largest economy.

Chinese authorities are continuing to deploy additional fiscal and monetary measures in an effort to revive economic activity, aiming to pull the country out of stagnation and back onto a stable growth path.

Gold prices fell in European trading on Tuesday, extending losses for the third consecutive session as the metal once again slipped below the key 4,000-dollar level per ounce, pressured by a stronger U.S. dollar against a basket of major currencies.

More hawkish remarks from several Federal Reserve officials reduced expectations of another rate cut in December, while investors await further U.S. economic data for clearer direction.

Price Overview

• Today’s prices: Spot gold fell 0.9% to $3,966.82 an ounce, down from the opening level of $4,001.66, after hitting an intraday high of $4,005.86.

• On Monday, gold closed slightly lower—less than 0.1%—marking its second straight daily loss.

U.S. Dollar

The U.S. Dollar Index rose about 0.2% on Tuesday, extending gains for the fifth session in a row to a three-month high of 100.05 points, reflecting continued strength of the greenback against major and minor currencies.

A stronger dollar makes gold—priced in dollars—less attractive to holders of other currencies. The rise came as investors favored the dollar as the most appealing asset amid growing uncertainty over whether the Federal Reserve will deliver another rate cut in December, following a series of hawkish statements from policymakers.

The Fed lowered interest rates last week for the second consecutive time, but Chair Jerome Powell indicated that this could be the final cut of the year.

U.S. Interest Rates

• Dallas Fed President Lorie Logan said the Fed should not have cut rates at its most recent meeting, while Cleveland Fed President Beth Hammack also opposed last week’s move.

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

• According to CME’s FedWatch tool, market pricing for a 25-basis-point rate cut in December fell from 70% to 63%, while expectations of keeping rates unchanged rose from 30% to 37%.

• Investors are closely watching the upcoming release of key U.S. economic data, as well as further Fed commentary, to reassess the outlook for policy.

Gold Outlook

• Tim Waterer, Chief Market Analyst at KCM Trade, said the stronger dollar remains “a thorn in gold’s side,” as traders reassess the likelihood of another rate cut by year-end.

• He added: “If we see another weak ADP employment reading in the U.S., it could give gold a foothold to regain upward momentum.”

SPDR Holdings

Holdings in SPDR Gold Trust—the world’s largest gold-backed exchange-traded fund—rose by 2.58 metric tons on Monday to 1,041.78 tons, the highest level since October 24.

The euro fell in European trading on Tuesday against a basket of major currencies, extending its losses for the fifth consecutive session against the U.S. dollar and reaching a three-month low, as selling pressure on the single currency persisted amid strong demand for the dollar as the preferred safe investment.

The slowdown in eurozone inflation during October eased price pressures on European Central Bank policymakers and revived expectations of a possible rate cut in December.

Price Overview

• Today’s exchange rate: The euro fell 0.2% against the U.S. dollar to $1.1498 — its lowest level since August 1 — down from the opening level of $1.1520, after hitting an intraday high of $1.1521.

• On Monday, the euro closed 0.15% lower versus the dollar, marking its fourth straight daily loss amid persistent selling pressure.

U.S. Dollar

The U.S. Dollar Index rose about 0.2% on Tuesday, extending gains for a fifth consecutive session to reach a three-month high of 100.05 points, reflecting continued strength in the greenback against a basket of major and minor currencies.

This advance came as investors favored the dollar as the best available investment, amid rising uncertainty over whether the Federal Reserve will proceed with another rate cut in December, particularly after a series of hawkish comments from Fed policymakers.

The Federal Reserve lowered interest rates last week for the second consecutive time, though Chair Jerome Powell indicated that this may be the final cut of the year.

European Interest Rates

• Data released late last week showed headline inflation in the eurozone slowed as expected in October, while core inflation remained steady — easing price pressures on European Central Bank officials.

• Following these figures, market pricing for a 25-basis-point ECB rate cut in December rose from 10% to 25%.

• Investors now await further economic data from across Europe, as well as additional remarks from European Central Bank officials, to reassess the outlook for monetary policy.