US dollar index hovers close to 100

Today’s headlines

What’s happening: The US dollar traded higher this morning, hovering close to three-month highs.

What happened: The US dollar index inched toward the 100 psychological resistance level, as Federal Reserve members signalled caution over more interest rate cuts.

Investors also digested the latest economic manufacturing PMI data from the US.

Why it matters: Federal Reserve officials continued issued contradictory views of the current situation of the US economy and the risks it is facing. These comments are impacting market sentiment due to the delay in the release of economic reports following the federal government shutdown.

Fed Governor Lisa Cook, in her first policy speech since US President Donald Trump attempted to remove her, said that she acknowledged rising risks in the labour market, but supported the recent rate cut. She said, however, that she was undecided about next month’s rate cut. Meanwhile, President of the Federal Reserve Bank of Chicago Austan Goolsbee said inflation remains his primary concern.

Last week, the Fed had cut interest rates, the central bank’s Chairman Jerome Powell signalled that this could be the last reduction of 2025.

Data released on Monday showed that the ISM manufacturing PMI declined to 48.7 in October, from 49.1 in September. The figure also came in short of market projections of 49.5 and represented the eighth straight month of contraction in manufacturing activity. On the other hand, the S&P Global manufacturing PMI rose to 52.5 in October, from 52.0 in the previous month, with the latest reading signalling growth in the manufacturing activity for the third consecutive month.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.1% to reach 99.98 this morning.

The EUR/USD forex pair fell 0.1% to 1.1508, while the GBP/USD declined more than 0.1% to 1.3122.

Wall Street closed Monday’s session on a mixed note, with the Dow Jones index falling around 226 points to settle at 47,336.68, while the S&P 500 rose 0.17% to 6,851.97 and the Nasdaq 100 gained 0.44% to close at 25,972.94.

What to watch: With the non-availability of government economic reports due to the second-longest shutdown in the US, investors await data from non-government sources, including ADP employment, to get some insights into the current health of the economy.

The markets today

Japan’s stocks in focus today ahead of a basket of major economic reports this week

Context: Equity markets in Japan retreated from record high levels as investors booked profits after the long weekend.

Details: Data released this morning showed that the S&P Global Japan manufacturing PMI was revised downward to 48.2 in October, from the preliminary reading of 48.3. The figure also came in below the previous month’s 48.5. The latest reading signalled the steepest contraction in manufacturing activity since March 2024, following the sharpest decline in factory orders in 20 months.

Profit-taking weighed on key heavyweight firms, with shares of SoftBank Group, Hitachi, Mitsubishi Heavy Industries and Mitsubishi UFJ trading lower this morning.

Meanwhile, the Bank of Japan held its benchmark short-term rate at 0.5%, keeping borrowing costs at their highest mark since 2008. The decision was in-line with market estimates and was approved by a 7-2 vote.

Japan’s Nikkei 225 fell around 0.1% to 52,361.14 this morning, while the USD/JPY forex pair edged lower to 154.14.

What to watch: Investors await the release of Bank of Japan’s monetary policy meeting minutes (0350 UAE Time) on Wednesday.

Data on average cash earnings, S&P Global composite PMI and S&P Global services PMI from Japan will be released on Thursday. Japan’s nominal wages, which grew by 1.5% year-over-year in August, are expected to rise by 1.6% in September.

Analysts expect the S&P Global Japan composite PMI to decline to 50.9 in October, from a final reading of 51.3 in the previous month. The services PMI is projected to fall to 52.4 in October, from 53.3 in September.

Other Markets: European indices closed mixed on Monday, with the FTSE 100 and CAC 40 down by 0.16% and 0.14%, respectively, and the DAX 40 and STOXX Europe 600 up by 0.73% and 0.07%.

The news shaping the markets

Ukraine’s President Volodymyr Zelenskyy said that the country had received more US-made Patriot air defence systems from Germany. The news sent the RUB/USD pair lower in forex trading this morning.

South Korea’s consumer prices surged 2.4% year-over-year in October. The figure coming in higher than market estimates of 2.1% exerted pressure on the KRW/USD forex pair.

Mexico’s S&P Global manufacturing PMI declined to 49.5 in October, from 49.6 in the previous month. Continued contraction in manufacturing activity sent the MXN/USD pair lower in forex trading this morning.

Canada’s S&P Global manufacturing PMI climbed to 49.6 in October, from 47.7 in the previous month. However, manufacturing activity remaining in the contraction zone exerted pressure on the CAD/USD forex pair.

Brazil’s S&P Global manufacturing PMI surged to 48.2 in October, from 46.5 in the previous month, sending the BRL/USD pair higher in forex trading this morning.

What else to watch today

Brazil’s IPC-Fipe inflation (1200 UAE Time) and industrial production (1600 UAE Time), Spain’s unemployment change (1200 UAE Time), 12-month Letras auction (1340 UAE Time) and 6-month Letras auction (1340 UAE Time), South Africa’s 2037 Bond auction (1330 UAE Time), 2040 Bond auction (1330 UAE Time) and 2048 Bond auction (1330 UAE Time), UK’s Treasury Gilt 2029 auction (1400 UAE Time), Germany’s 2-year Schatz auction (1430 UAE Time), Mexico’s consumer confidence (1600 UAE Time), as well as US Redbook index (1755 UAE Time), RCM/TIPP economic optimism index (1910 UAE Time) and NY Fed Treasury purchases 10 to 22.5 yrs (1930 UAE Time).