Bullish sentiment toward the U.S. dollar weakened as negotiations between Democrats and Republicans over reopening the federal government showed progress, prompting the dollar index to retreat from recent highs amid growing expectations that the longest government shutdown in U.S. history may soon come to an end.

The Federal Reserve is expected to resume receiving economic data shortly, a move that would ease its current caution. In this context, the probability of a rate cut in December has risen to 74%, while U.S. Treasury yields have declined.

Nevertheless, the greenback found temporary support from increased demand for safe-haven assets amid falling U.S. stock indices and the Supreme Court’s decision to review the legality of certain import tariffs.

According to the PredictIt platform, the probability of Donald Trump losing now stands at 73%, while Polymarket estimates it at 64%. Analysts noted that repealing import tariffs could weigh heavily on the U.S. economy and the dollar, as it would trigger refund payments and widen the federal deficit — factors that would likely force spending cuts and tax increases, slowing GDP growth and pushing the Fed toward deeper rate cuts.

In the short term, however, heightened market volatility could still lend support to the dollar and other safe-haven currencies.

The USD/CHF and USD/JPY pairs both pulled back from recent highs.

The Swiss franc came under pressure amid renewed speculation that the Swiss National Bank might revert to a negative interest-rate policy, while the Japanese yen faced headwinds from the Bank of Japan’s hesitation to signal continued policy normalization.

Minutes from the latest Bank of Japan meeting showed that some board members urged caution, warning that Japan’s prolonged experience with deflation means that excessive rate hikes could risk a return to that state. Such remarks reduced the likelihood of another near-term increase in the overnight rate, keeping pressure on the yen. At the same time, verbal intervention and rising safe-haven demand amid growing market volatility contributed to mixed moves in the USD/JPY pair.

Meanwhile, the British pound fell to its lowest level since April after Chancellor Rachel Reeves indicated she was unwilling to repeat Labour’s election pledge not to raise taxes significantly. Reeves blamed the previous Conservative government and ongoing trade frictions for damaging the UK economy.

As of 11:16 GMT, the U.S. Dollar Index was steady at 100.2 points, after recording a high of 100.2 and a low of 100.06.

Gold prices rose by more than 1% in European trading on Wednesday, heading back toward the 4,000-dollar-per-ounce level and on track to record their first gain in four sessions, supported by renewed safe-haven demand amid heavy losses in global equity markets.

Prices were also boosted by a pause in the U.S. dollar’s rally against a basket of major currencies ahead of key U.S. labor-market data expected to provide further clues about the likelihood of a Federal Reserve rate cut in December.

Price Overview

• Gold prices today: Spot gold rose by about 1.4% to $3,987.15 per ounce, from an opening level of $3,932.04, after touching a session low of $3,929.97.

• At Tuesday’s close, gold fell 1.75%, marking a third consecutive daily loss as doubts grew over the probability of a December rate cut.

Global Stock Losses

Following sharp declines in U.S. equities on Wall Street amid mounting concerns about excessive valuations in artificial-intelligence stocks, global markets saw broad-based losses as selling accelerated and worries about the sustainability of recent record gains deepened.

As a result, investors turned to traditional safe-haven assets such as gold, the Japanese yen, and U.S. Treasuries in an effort to hedge against heightened volatility in equity markets.

U.S. Dollar

The U.S. Dollar Index fell 0.15% on Wednesday, pulling back from a three-month high of 100.25 points, reflecting a pause in the dollar’s upward momentum against major and minor currencies.

Beyond profit-taking, the dollar retreated ahead of key U.S. data later today on private-sector employment, with official economic reports still delayed due to the second-longest government shutdown in U.S. history.

U.S. Interest Rates

• According to the CME FedWatch tool, market pricing for a 25-basis-point rate cut at the December FOMC meeting remains steady at 72%, while expectations for no change stand at 28%.

• Investors await the release of October private-sector employment data later today to reassess rate-cut probabilities.

Gold Outlook

Carsten Minki, analyst at Julius Baer, said the recent shift toward risk aversion in financial markets, driven by growing concerns about stock-market valuations, is helping gold stabilize after retreating from record levels.

Minki added that physical demand for gold remains strong from both safe-haven buyers and emerging-market central banks.

SPDR Fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.15 metric tons on Tuesday to 6,378 metric tons, the lowest level since October 29.

U.S. stock indexes fell on Tuesday, deepening losses as concerns over stretched valuations in artificial intelligence companies weighed heavily on the market. Warnings from Wall Street giants also fueled fears that equities could be heading for a correction.

Global markets may be nearing a pullback after a relentless rally this year. Executives from Goldman Sachs and Morgan Stanley cautioned investors on Tuesday to prepare for a potential market decline within the next two years.

Global equities have risen to record highs in 2025, driven by strong gains in AI-related stocks and expectations of lower interest rates. Last month, major U.S. indexes reached new peaks, while Japan’s Nikkei 225 and South Korea’s Kospi also hit record levels. China’s Shanghai Composite climbed to its highest point in a decade, supported by easing trade tensions between the U.S. and China and a weaker dollar.

Goldman Sachs CEO David Solomon, speaking at the Global Investment Leaders Summit in Hong Kong, said: “We’re likely to see a 10% to 20% decline in equity markets within the next 12 to 24 months.” He added: “Markets move higher and then reset to allow investors to reassess valuations.”

Solomon emphasized that such cyclical pullbacks are a normal part of long-term bull markets, noting that the bank’s consistent advice remains to stay invested and rebalance portfolios rather than attempt to time the market. “A 10% to 15% market drop happens frequently, even during periods of economic growth,” he said. “That doesn’t change the structural outlook for capital allocation.”

Morgan Stanley CEO Ted Pick echoed that sentiment, saying investors should welcome corrections as a sign of a healthy market, not a financial crisis. “We should embrace 10% to 15% pullbacks as long as they’re not triggered by a major economic shock,” he said.

Their comments followed warnings from the International Monetary Fund about the risk of a sharp correction, as well as concerns voiced by Fed Chair Jerome Powell and Bank of England Governor Andrew Bailey about excessive equity valuations.

Why are correction warnings increasing?

Tech stocks have become a major drag on the Nasdaq, with six of the “Magnificent Seven” — the leading AI-driven stocks behind this year’s rally — declining in the latest session. The Philadelphia Semiconductor Index (SOX) fell 4%.

JPMorgan Chase CEO Jamie Dimon had also warned last month of rising risks of a major correction within six months to two years, citing geopolitical tensions as a key factor.

Chuck Carlson, CEO of Horizon Investment Services in Indiana, said: “Investors appear more concerned about valuations now than they have been recently, at least in this session.” He added: “Many of these companies have very high valuations, while their earnings are strong but not extraordinary — the perfect setup for profit-taking.”

Meanwhile, the partial U.S. government shutdown — now close to becoming the longest in history — has halted the release of official data, forcing markets to rely on private indicators such as the ADP employment report due Wednesday.

Investors are also parsing remarks from Federal Reserve officials for clues on how the central bank will shape policy amid the data blackout.

Bright spots in Asia

Both U.S. banks pointed to Asia as a key area of optimism in the years ahead, supported by recent developments such as the U.S.–China trade deal.

Goldman Sachs expects global investors to continue channeling capital into China, emphasizing that it remains one of the world’s largest and most vital economies.

Morgan Stanley remains bullish on Hong Kong, China, Japan, and India, highlighting their unique growth narratives — from Japan’s corporate governance reforms to India’s infrastructure expansion — as long-term investment themes.

“It’s hard not to feel optimistic about Hong Kong, China, Japan, and India,” Pick said. “Four very different stories, but all part of the same broader Asian growth narrative.”

He added that China’s artificial intelligence, electric vehicle, and biotechnology sectors stand out as the main growth drivers in the coming years.

The euro rose in European trading on Wednesday against a basket of global currencies, attempting to recover from a three-month low against the U.S. dollar. The single currency is on track for its first gain in six sessions, supported by buying activity at lower levels and by the pause in the dollar’s recent rally in foreign-exchange markets.

Easing inflation across Europe in October reduced pressure on European Central Bank policymakers and revived expectations for a potential rate cut in December.

Price Overview

• EUR/USD rate today: The euro rose 0.15% to 1.1498 dollars from the opening level of 1.1482, after touching an intraday low of 1.1477.

• On Tuesday, the euro fell 0.3% against the dollar—its fifth straight daily loss—hitting a three-month low at 1.1473 amid persistent selling pressure.

U.S. Dollar

The dollar index fell 0.15% on Wednesday, retreating from a three-month high of 100.25 points, reflecting a pause in the U.S. currency’s recent uptrend against major and minor peers.

Beyond profit-taking, the dollar eased ahead of key U.S. data due later in the day on private-sector employment in October, which is expected to offer fresh insight into labor-market conditions.

Negative Pressure

Despite the euro’s current rebound, the common currency remains under downward pressure as investors continue to favor the U.S. dollar as the most attractive asset in the market. Persistent concerns over a prolonged interest-rate gap between the U.S. and Europe also weigh on sentiment.

European Interest Rates

• Data released late last week confirmed a slowdown in headline inflation across the euro area in October, as expected, while core inflation remained sticky—reducing pressure on the ECB to maintain its restrictive stance.

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

• Investors now await further economic data from Europe and comments from ECB officials to reassess the outlook for monetary policy.