The US dollar edged lower on Monday as the euro strengthened and Treasury yields held near weekly lows.
Markets still price a 25-basis-point Federal Reserve interest rate hike in December, but have scaled back the number of increases expected through mid-2027, eroding part of the currency’s support.
Renewed doubts over the returns on investment in AI have boosted demand for Treasuries, keeping yields subdued and placing pressure on the US dollar.
Looking ahead, market participants are preparing for a busy week ahead, which opens with today’s US manufacturing PMI, expected to see improving activity levels, and this week’s tech earnings, including Apple, AMD and Qualcomm. A resilient factory activity reading would strengthen the case for further Fed tightening, lifting yields and the dollar, while Apple’s numbers will influence sentiment. Chipmakers’ results will feed the debate over AI demand.
Tuesday market attention will be upon the US midterm elections. The outcome could shape market expectations. Investors will also monitor any signals regarding Middle East tensions, with any renewed escalation potentially pushing oil higher, reviving inflation concerns and fueling safe-haven demand for the currency.
The services ISM on Wednesday is expected to stay firm, and Friday’s nonfarm payrolls will show whether the labour market is holding up. Comments from several Fed officials during the week could also add additional volatility to the markets.
