Dollar Stable as Data-Heavy Week Begins, Euro Inches Higher

The U.S. dollar held steady on Monday, positioned for a strong monthly gain, while the euro remained mostly flat at the outset of a busy week for economic data.

In recent weeks, the dollar has gained momentum amid rising expectations of fewer rate cuts by the Federal Reserve, thanks to reasonably positive U.S. economic data. This sentiment will be tested with the upcoming U.S. GDP report on Wednesday and, notably, the October employment report on Friday.

The jobs report is expected to show that employment growth slowed to around 111,000 jobs in October, factoring in disruptions from labor strikes and weather impacts from Hurricanes Milton and Helene.

The Federal Reserve has signaled an interest rate cut of 25 basis points at its meeting next month, following a 50-basis-point cut in September, but this week’s data could still impact its decision.

In addition to economic indicators, the dollar has been buoyed by increased odds of former President Donald Trump’s potential return to the White House, with this week marking the last full week before the U.S. presidential election on November 5. Both Trump and his Democratic rival, Vice President Kamala Harris, are close in the polls, with Trump showing a slight advantage in prediction markets.

Meanwhile, five of the “Magnificent Seven” tech giants are set to release their earnings in the following order: Alphabet (GOOGL) on October 29, Microsoft (MSFT) and Meta Platforms (META) on October 30, and Apple (AAPL) and Amazon (AMZN) on October 31.

Euro Sees Monthly Losses

In Europe, EUR/USD rose by 0.2% to 1.0819, although the euro is on track for a monthly decline of nearly 3% amid ongoing weak growth prospects. The European Central Bank (ECB) has already implemented three rate cuts this year, each by 25 basis points, yet expectations are growing for a potentially larger cut at the next meeting. These expectations could be further reinforced if Thursday’s eurozone inflation report shows that inflation remains below the ECB’s 2% target.

Sterling Supported by Budget Anticipation

GBP/USD inched up 0.1% to 1.2973, but it remains on course for a 0.5% weekly drop, adding to a monthly loss of 3%. The UK’s Labour government is set to present its first budget on Wednesday, with Finance Minister Rachel Reeves not expected to introduce additional borrowing or tax cuts, balancing high public spending and debt without raising income taxes.

Yen Weakens Amid Political Shifts

USD/JPY rose 0.5% to 153.09, near three-month highs, with the yen dropping after Japan’s weekend parliamentary elections. Reports suggest that the ruling Liberal Democratic Party (LDP) did not secure a majority, leading to coalition negotiations with smaller regional parties, creating political uncertainty that may inhibit further rate hikes by the Bank of Japan.

Elsewhere, USD/CNY rose 0.2% to 7.1305, reaching a two-month high as China’s PMI data is due later in the week.