The U.S. dollar retreated Monday amid political uncertainty ahead of Tuesday’s presidential election and with the Federal Reserve expected to cut interest rates later in the week. At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.5% to 103.695, after strong gains in October.

## Dollar slips ahead of US election
The focus at the start of this week turns to the all-important US presidential election on Tuesday, with the race between Republican Party candidate Donald Trump and Democratic rival Kamala Harris extremely close. Harris received a boost when a survey out of Iowa showed her leading Trump by three percentage points, mainly due to support among women. Markets are adjusting their positions based on the election outcome, leading to potential abnormal swings in USD crosses.

### Analysts’ Perspective
– Analysts believe Trump’s policies on immigration, tax cuts, and tariffs could impact inflation, bond yields, and the dollar.
– Markets are also anticipating a 25 basis point cut by the Federal Reserve following their policy meeting on Thursday.

The release of Friday’s jobs report showed a slowdown in job creation for October, but external factors like hurricanes and labor disputes influenced the data. The implications of the Fed’s decision on the dollar will be clearer once the election volatility settles down.

## Euro gains on eurozone data improvement
In Europe, the Euro traded 0.5% higher at 1.0892, benefiting from dollar weakness and positive recent data. The final Eurozone Manufacturing PMI for October showed improvement, indicating a potential turnaround in the sector.

### Analysts’ Insight
– Market sentiment has shifted regarding the European Central Bank’s dovish stance after positive growth and inflation numbers.
– The Pound bounced back from losses following the new Labour government’s budget announcement.

The Bank of England is expected to cut interest rates by 25 basis points on Thursday, although the decision is complicated by gilt sell-offs post-budget. The market will closely watch the MPC’s response to the fiscal measures announced in the budget.

## Yen rebounds from three-month lows
The Japanese Yen fell 0.6% to 152.11, retracting from recent highs due to dollar weakness. The yen also received support from a somewhat hawkish message from the Bank of Japan last week. The Chinese Yuan dropped 0.3% as attention shifts to the NPC’s meeting that could approve significant fiscal spending.

In conclusion, the financial markets are closely watching the US election, Fed’s interest rate decision, and central bank meetings around the world for potential impacts on currencies. Traders and investors need to stay informed and adaptable to navigate through the volatility in the coming days.

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