During today's Asian trading, the US dollar consolidated against major currencies, remaining near its highest level since July 30, as market participants took a wait-and-see attitude ahead of the publication of new US data that may clarify the prospects for the Fed's monetary policy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.01% to 104.31. Since the beginning of the month, the index has gained 3.5%, which is the largest increase since April 2022. The dollar was supported by a lot of economic data that indicates the stability of the US economy. The growing likelihood of Donald Trump winning the presidential election has also given a boost to the dollar. Trump's policies on tariffs, tax and immigration are seen as inflationary, thus negative for bonds and positive for the dollar. This week, the markets will receive a number of important statistical data, including the Federal Reserve's preferred inflation indicator (the core personal consumption expenditures price index), the preliminary report on US GDP for the 3rd quarter, as well as a lot of data on the US labor market, the most important of which is the October employment report, which is scheduled for publication on Friday. Investors will carefully analyze the data to get an idea of the state of the US economy and its potential impact on the pace of further interest rate cuts by the Fed. According to the CME FedWatch Tool, markets see a 98.4% probability of a 0.25% rate cut at the November meeting (compared to 92.5% a week earlier) and a 70.7% probability of a 0.25% rate cut in December (compared to 69.5% a week earlier).
The yen stabilized near a three-month low against the US dollar, as the loss of the parliamentary majority by Japan's ruling coalition in the elections increased uncertainty about the nation's political and monetary outlook. Meanwhile, Japan's finance minister reiterated that the authorities will closely monitor currency fluctuations, including those caused by the actions of speculators. Experts also warn that increased financial market volatility may prompt the Bank of Japan to keep the interest rate unchanged for longer than currently expected. The next meeting of the Bank of Japan will be held on Thursday, with consensus estimates suggesting that the Bank will leave the rate at 0.25%.