The US dollar rose gradually on Monday after fears of a renewed escalation in the trade war between the United States and China eased, while political developments in France and Japan weighed on both the euro and the yen.

The dollar index — which measures the performance of the US currency against a basket of six major peers — climbed 0.2% to 99.2, recovering from last week’s losses that followed President Donald Trump’s announcement of 100% tariffs on China.

That announcement revived memories of “Liberation Day” last April, when Trump imposed sweeping tariffs on Chinese imports, triggering a sharp sell-off in stock and cryptocurrency markets on Friday.

Trump softens his tone

Tim Kelleher, head of institutional FX sales at Commonwealth Bank in Auckland, said: “The mood is definitely tense, but it looks like Trump has toned things down again a bit.”

He added, referring to a saying popular among traders known as “TACO” — short for “Trump Always Chickens Out.”

After announcing 100% tariffs on Friday, Trump wrote on Truth Social Sunday: “Don’t worry about China. Everything will be fine! President Xi, a very respected man, had a bad moment, but he doesn’t want a recession for his country, and neither do I. The United States wants to help China, not hurt it!”

Euro declines, dollar rises against the yen

Market liquidity was partly affected by the Columbus/Indigenous Peoples’ Day holiday in some US states, though stock markets remained open. Japanese markets were closed for Health and Sports Day.

The euro fell 0.3% to $1.1584, ignoring the announcement by the French presidency that Prime Minister Sébastien Lecornu had formed his new cabinet on Sunday, which included the reappointment of Roland Lescure, one of Emmanuel Macron’s closest allies, as finance minister.

Against the Japanese yen, the dollar climbed 0.8% to 152.295 yen as investors monitored the prospects of the new Liberal Democratic Party leader, Sanae Takaichi, after the Komeito party withdrew from the ruling coalition on Friday — a setback to her hopes of becoming Japan’s first female prime minister.

Currencies and commodities

Cryptocurrency markets saw swings between gains and losses after Friday’s sharp sell-off, with Bitcoin rising 0.2% to $115,313.

In commodities, gold hit a new record high of $4,079.1 an ounce, up 1.5%.

The offshore Chinese yuan regained some stability, trading at 7.1416 per dollar after touching an earlier low of 7.144, supported by data showing faster Chinese export growth in September.

Volatility expected in currency markets

Despite the slight improvement in sentiment on Monday, analysts warned that markets remain fragile and currencies could experience sharp price swings.

Lee Hardman, currency strategist at MUFG, said: “As we saw earlier this year, neither side can afford such high tariffs for long, and Trump’s latest remarks again point to a potential path toward de-escalation.”

He added that the trade threats may only increase short-term FX volatility and could trigger unwinding in some carry trades.

Carry trades involve borrowing in low-yielding currencies to invest in higher-yielding ones, with the Japanese yen and Swiss franc often used as funding currencies — both of which were the weakest on Monday.

The Australian dollar, which tends to rise in risk-on environments, was the best performer among major currencies, up 0.75% to $0.6521, while the British pound was little changed at $1.3327.

Silver prices rose in European trading on Monday, extending gains for the fourth consecutive session and continuing to break record highs after surpassing the 50-dollar mark per ounce for the first time in history. The metal also approached the 52-dollar threshold amid strong bullish momentum.

The rally comes as demand for precious metals as safe-haven assets remains robust, driven by renewed trade tensions between the United States and China and expectations that the US Federal Reserve will continue cutting interest rates.

Price Overview

• Silver prices today: Silver rose 3.4% to an all-time high of 51.71 dollars per ounce, up from the session’s opening level of 50.02 dollars, after touching an intraday low of 50.01 dollars.

• On Friday, silver gained 1.5%, marking its third straight daily advance.

• Last week, silver climbed 4.2%, achieving its eighth consecutive weekly gain — the longest winning streak since May 2020 — supported by strong demand from retail investors.

Trade Tensions

On Friday, US President Donald Trump threatened to impose 100% tariffs on Chinese imports to the United States, while simultaneously announcing new export restrictions on advanced software, set to take effect on November 1. The move came as part of Washington’s response to Beijing’s curbs on the export of rare-earth metals and sensitive industrial equipment.

In turn, the Chinese government defended its measures as legitimate steps to safeguard national interests, though it has so far refrained from retaliatory tariffs on American goods — signaling its intent to avoid a renewed escalation in the trade war between the world’s two largest economies.

Bullish Outlook

Goldman Sachs on Sunday projected that silver prices would continue rising over the medium term, driven by private investment inflows. However, the bank also cautioned that short-term volatility and downside risks remain higher for silver compared to gold.

Gold prices rose in European trading on Monday, extending gains for the second consecutive session and continuing to break record highs, coming very close to trading above 4,100 dollars per ounce for the first time in history.

The rally comes on the back of renewed safe-haven demand amid escalating trade tensions between the United States and China, as well as growing expectations of interest rate cuts by the US Federal Reserve.

Price Overview

• Gold prices today: Gold rose by 1.5% to 4,078.22 dollars, up from the opening level of 4,017.92 dollars, after touching a session low of 4,007.54 dollars.

• On Friday, gold prices gained more than 1.0%, resuming their upward trend after a brief pause for profit-taking and correction.

• Last week, gold rose by 3.4%, marking its eighth consecutive weekly gain — the longest winning streak since late December 2024.

Trade Tensions

On Friday, US President Donald Trump threatened to impose 100% tariffs on Chinese imports to the United States, while also announcing new export controls targeting advanced software, set to take effect on November 1. The measures come as Washington’s response to Beijing’s recent restrictions on exports of rare earth metals and sensitive industrial equipment.

China, for its part, defended its export controls, calling them justified measures to protect its national interests. However, Beijing has so far refrained from imposing retaliatory tariffs on American goods, signaling its desire to avoid a renewed escalation in the trade war between the world’s two largest economies.

US Interest Rates

• According to CME Group’s FedWatch Tool, the probability of a 25-basis-point rate cut at the October meeting currently stands at 96%, while the likelihood of keeping rates unchanged is just 4%.

• To reassess these expectations, investors are closely monitoring the release of new US economic data, as well as upcoming comments from Federal Reserve officials.

Gold Market Outlook

Kyle Rodda, analyst at Capital.com, said: “It’s interesting that developments in the Middle East have recently had a limited impact on the gold market, but we’re now seeing renewed risk sentiment driven by escalating trade tensions between the US and China.”

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 3.72 metric tons on Friday, bringing the total to 1,017.16 metric tons — the highest level in nearly two weeks.

The euro fell in European trading on Monday against a basket of major global currencies, resuming its decline after Friday’s brief rebound against the US dollar. The single currency is now heading toward a two-month low, weighed down by fresh political developments in France, the euro area’s second-largest economy.

The French presidency announced the formation of a new government led by Sébastien Lecornu, with President Emmanuel Macron reappointing one of his closest allies, Roland Lescure, as finance minister.

With inflationary pressures once again building across the eurozone, expectations for further interest rate cuts by the European Central Bank have diminished for the remainder of this year. To reassess those expectations, investors are awaiting additional economic data and remarks from ECB officials.

Price Overview

• Euro exchange rate today: The euro fell by more than 0.2% against the dollar to 1.1592, down from the opening level of 1.1618$, after reaching a session high of 1.1630.

• On Friday, the euro rose 0.5% against the dollar — its first gain in five days — recovering from a two-month low of 1.1542.

• Last week, the euro lost 1.0% against the dollar — its second weekly decline in three weeks and the sharpest drop since late July — amid the ongoing political crisis in France.

US Dollar

The US dollar index rose around 0.3% on Monday, resuming gains after a brief pause in the previous session and moving closer to a two-month high, reflecting continued strength of the greenback against a basket of major and minor currencies.

This advance came after US President Donald Trump signaled openness to dialogue with China to resolve trade disputes between the world’s two largest economies, easing concerns following his earlier threats to impose tariffs of up to 100% on Chinese imports.

Political Developments in France

Over the weekend, the French presidency announced the new government lineup under Prime Minister Sébastien Lecornu, with President Macron reinstating Roland Lescure — one of his closest allies — as finance minister.

The appointment came amid a deep political crisis after Lecornu’s previous government resigned just hours after being formed, leaving a vacuum and heightened political tension in Paris.

The main priority for the new French government is to address the budget crisis and push through the national spending bill — a move seen by observers as an attempt to calm markets and build a negotiating bridge with various parliamentary blocs.

However, the decision to name Lescure, a staunch Macron ally, as finance minister has cast doubts over the government’s longevity. Opposition parties have already threatened to bring down the cabinet quickly if it fails to distance itself from Macron’s earlier policies.

European Interest Rates

• Money-market pricing currently implies less than a 10% chance of a 25-basis-point ECB rate cut in October.

• Traders have scaled back bets on further monetary easing, signaling that the current rate-cut cycle is effectively over for this year.

• Policymakers at the European Central Bank believe no additional rate cuts are needed to achieve the 2% inflation target, despite new forecasts pointing to lower rates over the next two years.

• Sources indicate that unless the eurozone faces another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Investors are now awaiting fresh economic data across Europe and closely monitoring comments from ECB officials to reassess policy expectations.