US Dollar Kicks Off November with Strength

The US dollar has started the new month on a firm footing, gaining ground against most major currencies. Within the G10 group, the Australian dollar and Norwegian krone have posted modest increases, while among emerging market currencies, the Mexican peso leads with a roughly 0.15% gain.

Market Overview and Key Data Releases

The current news flow is relatively light, with the final manufacturing PMI readings capturing most attention. In energy markets, OPEC+ has agreed to increase production by 137,000 barrels per day for December, maintaining this level into the first quarter of 2026. December WTI crude prices remain steady, having briefly risen to $61.50 before retreating to just below $61.00.

China has modified its gold tax policy in a manner that appears to encourage purchases through Shanghai exchanges or via the central bank. Gold prices remain mostly unchanged, trending slightly lower. Equity markets are advancing, though Japan’s exchanges were closed today for a holiday, limiting their participation. The South Korean Kospi led regional gains with a 2.8% surge. In Europe, the Stoxx 600 index reversed a four-day decline, rising approximately 0.4% by late morning, while US S&P 500 and Nasdaq futures improved between 0.3% and 0.5%.

Government bond yields rose slightly in Europe, generally under one basis point, with the US 10-year Treasury yield increasing by about one basis point to near 4.09%, following an eight-basis-point climb last week.

US Dollar Technical Movement and Economic Calendar

The Dollar Index closed October at its highest level since August 1, having gained roughly 2.1% over the month. It continues to extend these gains, currently nearing 99.90, eyeing the 100.00–100.25 zone, with the 200-day moving average positioned around 100.40.

Despite the ongoing US federal government shutdown, this week is data-rich, featuring critical releases from the private sector, including final manufacturing PMI, ISM reports, auto sales, and the University of Michigan’s preliminary October consumer sentiment survey. ADP will release its estimate of private sector employment growth. Auto sales are projected to slow to around a 15.5 million unit annual pace, among the slowest this year, while ADP payrolls are estimated to recover mildly with a gain near 25,000 following a 32,000 decline in September.

Additionally, the US Supreme Court will hear arguments regarding the administration’s emergency powers usage related to tariffs, with market participants closely monitoring judicial commentary for signals on the court’s stance.

Euro: Near Term Pressure and Data Expectations

The euro traded to a fresh October low near $1.1520 ahead of last weekend and dipped further to approximately $1.1510 today in European session. A break below $1.1490 would open risk towards the late July and early August lows near $1.1400. However, the currency’s position below the lower Bollinger Band indicates overstretched conditions.

The final October manufacturing PMI stood firm at 50.0, unchanged from its preliminary reading. Germany’s manufacturing PMI remained subdued at 49.6, whereas France saw slight improvement to 48.8 from an initial 48.3. Both Spain and Italy registered better-than-expected PMIs, at 52.1 and 49.9 respectively. With the European Central Bank on hiatus, the euro appears less reactive to data releases this week, although Germany’s factory orders, industrial output, and trade balance reports remain on the agenda.

Chinese Yuan: Testing Resistance Amid Dollar Strength

The offshore yuan (CNH) experienced a third consecutive day of gains against the greenback before the weekend, continuing to edge higher today to nearly CNH7.1270—a six-day peak that challenges the 20-day moving average for the first time since mid-October. Resistance is anticipated around CNH7.1300, with further upside potential towards CNH7.1450–7.1500.

Meanwhile, the People’s Bank of China has set the dollar reference rate lower for four straight weeks, at CNY7.0867 today, slightly below last week’s 7.0880. RatingDog (formerly Caixin) reported China’s manufacturing PMI slipping to 50.7 from 51.2, still outperforming the official PMI from the Federation of Logistics and Purchasing, which has remained below 50 since early Q2.

Japanese Yen: Consolidation Before Further Upside?

After the Federal Reserve’s hawkish rate cut and the Bank of Japan’s persistent dovish stance, the dollar surged to JPY154.45 last Thursday. Ahead of the weekend, it consolidated above JPY153.65 and is trading quietly today within a JPY154.00–154.30 range. This pattern suggests a pause before a possible next advance, with resistance spanning JPY154.50 to JPY155.00.

Japan’s markets remain closed in observance of Culture Day, reopening tomorrow with the release of the final October manufacturing PMI. More market-relevant this week are labor earnings and household spending figures due Thursday and Friday, both expected to show year-on-year gains. September data indicated activity improvement after weakness in August, and Tokyo’s October CPI points to sustained price pressures.

The combination of a weak yen and improved economic data may increase speculation about a Bank of Japan rate hike at its December meeting. Market instruments currently price slightly below a 50% probability, up from earlier in the month but below the near 80% likelihood priced at September-end.

British Pound: Pressured Below Key Levels

Sterling fell to six-month lows before last weekend, dipping slightly below $1.3100, and remains just above this level today after limited gains over the past two weeks. It closed below its lower Bollinger Band in the third consecutive session by late last week. Approximately GBP 470 million in options at the $1.3100 strike expire today. Continued downside momentum would likely target support in the $1.2950–1.3000 range.

The final October manufacturing PMI read 49.7, consistent with its preliminary figure and up from 46.2 in September, but has not surpassed the 50-threshold since the end of Q3. The highlight of the week is Thursday’s Bank of England meeting. Market pricing implies a roughly one-in-three chance of a rate cut, higher than the near one-in-ten probability seen at September’s close.

Canadian Dollar: US Dollar Pushes Higher Post-Rate Decision

Following the Bank of Canada’s surprisingly hawkish rate cut in mid-last week, the Canadian dollar weakened, falling below CAD1.3890, before US dollar strength propelled it to a fresh weekly high near CAD1.4035 ahead of the weekend. It marginally extended this to around CAD1.4040 today, with technical resistance at CAD1.4080 and potential targets near CAD1.4165 if breached.

Canada’s October manufacturing PMI, released today, provides fresh data but is unlikely to generate significant market reaction given the economy’s soft patch, as the PMI has not exceeded 50 since January. Market focus will likely shift to Bank of Canada Governor Macklem’s fireside chat scheduled for 1:30 PM ET, where insight into the monetary outlook will be sought. The market broadly views the easing cycle as concluded, though Macklem may seek to maintain policy flexibility.

Canada’s trade data release scheduled for tomorrow has been postponed due to US data delays, possibly affecting the October Q3 GDP announcement planned for November 28. The week’s highlight remains Friday’s employment report, which will be challenging to surpass given September’s robust gain of 106,000 full-time positions.

Australian Dollar: Consolidation Amid Weakening Data

The Australian dollar peaked near $0.6620 mid-last week but declined to almost $0.6530 in the latter half. Following a weak settlement last week, it has mainly consolidated between $0.6540 and $0.6560. Immediate downside risk targets $0.6500, which if breached may lead to a revisit of October’s low near $0.6440.

S&P confirmed Australia’s October manufacturing PMI slipped below 50 for the first time this year, falling to 49.7 from 51.4 in September. Household spending growth in September was a modest 0.2%, only half of expectations, with August data revised to flat from a prior 0.1%. Household spending has averaged 0.4% monthly growth through August and 0.3% in the first eight months of 2024 overall.

Despite subdued figures, rate cuts at tomorrow’s Reserve Bank of Australia meeting are unlikely. Swap markets imply a target cash rate of 3.40% by year-end 2025, slightly down from the current 3.60%, but nearly 30 basis points above the level priced three weeks earlier.

Mexican Peso: Moderation After Strong Carry Returns

The Mexican peso has been a favored carry-trade vehicle this year, generating approximate returns of 21.5% for dollar-based investors, combining a 13.7% appreciation and roughly 6.8% in interest rate differentials through September. The US dollar bottomed against the peso near MXN18.20 in mid-September following the FOMC rate cut, but since then, dollar-based investors have experienced small losses due to peso depreciation.

Currently, the peso is consolidating within last Thursday’s range (approx. MXN18.45–18.6050), with about $355 million in options expiring today at MXN18.60. A break above last week’s high could open the door toward MXN18.70 and potentially the September peak near MXN18.8650.

October’s manufacturing PMI data and IMEF surveys highlight an evident economic slowdown, reinforcing expectations that the central bank will continue easing this week. Worker remittances, critical for foreign currency inflows, totaled around $40.5 billion through August, down 6% from the same period in 2023. Meanwhile, Mexico’s trade deficit narrowed substantially, with a cumulative deficit of nearly $530 million recorded through August compared to about $18 billion a year ago.

The central bank convenes Thursday, with markets fully pricing a rate cut, in line with all economists surveyed by Bloomberg. Another rate reduction is anticipated next year. October CPI will be released Friday; even a modest softening is expected to keep inflationary pressures elevated.

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_Disclaimer: This analysis is for informational purposes only and does not constitute financial advice or constitute an offer to buy or sell any financial instrument._