USD slightly increases
The USD increased slightly in the second session as investors prepared to welcome a series of US economic data due after the government reopens, with the expectation that these figures will help clarify the interest rate outlook of the Federal Reserve (FED) in December.
The market reaction to US President Donald Trump's "turning around" move on taxes on more than 200 food items is quite quiet, as some experts say this decision is not surprising due to high pressure on living costs.
In other developments, the British pound continued to be pressured after a strong session on Friday when speculation increased around the budget on November 26 that the British government is about to announce.
The Swiss francs safe-haven assets hover around a months high, at 0.7941 francs to 1 USD, supported by concerns over a recent strong sell-off in the stock market.
The focus this week will be a series of US economic data to assess the health of the world's largest economy, including the September non-farm payrolls report due on Thursday.
We have been without data for more than 40 days, so I think the market will be particularly interested in any new information about the US economy, Carol Kong, currency strategist at Commonwealth Bank of Australia (CBA), said.
I think the risk is clearly leaning towards the possibility of a weaker jobs report and that will fuel market expectations for a Fed rate cut in December, while dragging the USD down.
Monetary developments were quite quiet in the early trading session in Asia on Monday before the data was released, with the euro falling 0.11% to 1.1607 USD, while the Australian dollar eased last week's gains and fell 0.15% to 0.6527 USD.
The New Zealand dollar also fell 0.12% to $0.5673, while the US dollar index edged up to 99.37.
Although many private sector data signals that the US economy continues to weaken, investors have cut expectations of a Fed rate cut next month, betting that gaps in economic data could delay or even depart the easing process.
Currently, the market only has a valuation of about 40% of the possibility of the FED cutting 25 basis points next month, compared to over 60% at the beginning of the month.
However, that is still not enough to significantly increase the price of the USD, which was caught up in a large-scale sell-off last week along with US stocks and bonds.
We believe the weakening of the US dollar in November reflects speculative traders reducing their US dollar buying positions ahead of a period of strong volatility, as US economic data is released at a higher frequency than normal in the coming few weeks, Thierry Wizman, global foreign exchange and interest rate strategist at Macquarie Group, said in a note.
British pound slightly slides
The British pound fell 0.11% to $1.3161 on Monday, following strong fluctuations over the weekend before the news that Finance Minister Rachel Reeves had no plans to increase income tax in the upcoming budget.
This information has investors worried, because they have expected the tax increase to contribute to offsetting the expected fiscal deficit, thereby pushing the UK Government's borrowing costs up sharply on Friday.
