The US dollar declined against its main trading partners on Monday morning as markets reacted to October’s weaker-than-expected employment report from Friday.
Investors are now focused on two key events this week: U.S. Election Day on Tuesday and the Federal Open Market Committee’s (FOMC) interest rate announcement on Thursday, following its two-day policy meeting.
As election results may not be fully known until later in the week, market attention on Tuesday will first be on the weekly Redbook report on same-store sales, along with service sector activity reports from S&P Global and the Institute for Supply Management.
The CME’s FedWatch tool currently suggests a 98.3% likelihood that the FOMC will announce a 25 basis point rate cut on Thursday, setting the target range between 4.50% and 4.75%. The probability of an additional cut, bringing the range down to 4.25%-4.5%, stands at 1.7%.
In foreign exchange movement leading into Monday, the US dollar-euro (USDEUR) exchange rate rose to 1.0905, up from 1.0832 at Friday’s U.S. close and 1.0864 on Friday morning. The Eurozone’s October manufacturing PMI showed slight improvement yet remained in contraction territory, while November investor confidence improved but stayed strongly negative, according to data released earlier on Monday. The European Central Bank’s next meeting is scheduled for December 12.
The pound (GBPUSD) moved up to 1.2969 from 1.2918 at Friday’s close and 1.2910 on Friday morning, with no UK data releases scheduled for Monday. The Bank of England is expected to announce a 25 basis point rate cut during its meeting on Thursday.
The yen (USDJPY) dropped to 151.7281 from 152.0752 at Friday’s U.S. close and 152.7121 on Friday morning. With Monday being a holiday in Japan, no new data were released overnight. The Bank of Japan’s next meeting is set for December 18-19.
Meanwhile, the Canadian dollar (USDCAD) rose slightly to 1.3903 from 1.3957 at Friday’s close and 1.3931 on Friday morning. There are no scheduled Canadian data releases on Monday. The Bank of Canada will meet next on December 11.
