The dollar falls in the first sessions of the week, awaiting the release of U.S. labor market data.

The US dollar opened the first session of the week on a decline as markets prepare for a week packed with labor market and growth data in the United States, alongside preliminary inflation data and growth in the Eurozone. However, the dollar is still on track to achieve its largest monthly gains in nearly two and a half years.

The Dollar Now

In terms of trading, the Dollar Index DXY – which measures the performance of the US currency against a basket of 6 major currencies – fell by about 0.12% to record 104.192 points. Nevertheless, it is still set to achieve gains of about 3.5% in October, marking the largest monthly gains for the Dollar Index since April 2022.

Both the euro and the British pound rose against the US dollar by 0.22% each, recording $1.0817 and $1.2978, respectively, in anticipation of the release of the public budget. Meanwhile, the dollar rose against the Japanese yen by about 0.47% to ¥152.92, after the ruling Liberal Democratic Party in Japan lost its parliamentary majority.

What Affected Dollar Movements Today?

This negative performance of the dollar today comes amid cautious investor sentiment as they prepare for a busy schedule of important economic data on this week's economic calendar. Major reports are set to be released, including third-quarter GDP data, the Personal Consumption Expenditures (PCE) price index, as well as the Non-Farm Payrolls (NFP) report, and preliminary inflation data in the Eurozone.

Adding to the dollar's losses today was the decline in US Treasury yields, which led to reduced demand for the greenback. The yields on the 10-year Treasury note fell by about 0.15% to record 4.304%, while the yields on the 2-year Treasury note dropped 0.12% from their highest levels since August, registering 4.156%.

Despite today's losses, the overall trend for the dollar remains positive as expectations lean towards a less aggressive pace of interest rate cuts by the US Federal Reserve, amid strong economic data in the United States and speculation about former President Donald Trump's potential victory in the presidential elections scheduled for November 4 and 5.

Regarding predictions, the CME FedWatch tool currently indicates a 96% probability of a 25 basis point rate cut at the Federal Open Market Committee meeting next week, after leaning towards a 50 basis point rate cut just two weeks ago.