NEWS

The US dollar weakened on Tuesday, sliding close to its lowest level in seven weeks, as investors turned their attention to upcoming revisions of US labor market data. These revisions are expected to reveal a weaker employment picture than previously reported, fueling expectations that the Federal Reserve may need to pursue a larger interest rate cut to support economic growth.

The greenback dropped by 0.2% against the Japanese yen, trading around 147.21, while the British pound inched up 0.1% to 1.3558. The euro eased slightly to 1.1752 after touching its strongest level since July 24. Meanwhile, the dollar index, which measures the performance of the US currency against a basket of major peers, fell to 97.25, its lowest reading since late July, ahead of preliminary revisions covering employment data from April 2024 through March 2025.

Economists widely expect the review to show a downward adjustment of up to 800,000 jobs, underscoring that the US labor market is softer than initially believed. Such a development could reinforce the view that the Federal Reserve has fallen behind in achieving its mandate of “maximum employment” and may need to act more aggressively to restore balance.

At present, money markets are pricing in a 25-basis-point rate cut, but the probability of a larger 50-basis-point cut has risen to about 12%. According to Point Trader Group, these expectations are creating significant opportunities for traders, particularly in safe-haven assets like gold. Spot gold surged to a record high of $3,659 per ounce on Tuesday, buoyed by the prospect of further monetary easing and heightened economic uncertainty.

Other currencies also reflected the shifting global sentiment. The Norwegian krone climbed 0.2% against both the dollar and the euro after the Labor Party-led government secured a second term, even though it holds only a minority in parliament. Political developments remain under close watch, from Tokyo to Buenos Aires, after the resignation of Japan’s Prime Minister Shigeru Ishiba, the dismissal of French Prime Minister François Bayrou, and the sudden removal of Indonesia’s finance minister in recent days.

The Indonesian rupiah dropped 0.8% following the cabinet shake-up, prompting Bank Indonesia to step in by purchasing long-dated government bonds in an effort to stabilize the market. These actions highlight the vulnerability of emerging-market currencies to abrupt political changes and their spillover effects on investor confidence.

Meanwhile, attention in Europe is shifting toward the European Central Bank, which will hold its policy meeting on Thursday. Markets widely expect the ECB to leave rates unchanged. Although economists were split last month on the possibility of further cuts, recent data showing inflation hovering near the 2% target and unemployment at historic lows have eased the pressure for additional monetary stimulus. This backdrop offers the ECB more flexibility to maintain its current stance, at least in the short term.

Taken together, global markets are navigating a landscape shaped by weaker US labor conditions, diverging central bank policies, and heightened political uncertainty. The dollar remains under structural pressure, with traders increasingly betting on lower US interest rates. Gold, by contrast, continues to shine as the preferred hedge against both monetary easing and geopolitical volatility.

According to Point Trader Group, these dynamics will likely generate substantial trading opportunities in forex and commodities markets over the coming months. Traders who can adapt quickly to shifting expectations around the Federal Reserve and the ECB, while also monitoring global political risks, may be best positioned to capitalize on the volatility. The interplay between economic fundamentals, monetary policy decisions, and investor sentiment is expected to remain the key driver of price action in the near term.

Ultimately, the dollar’s slide to multi-week lows signals that investor confidence is increasingly fragile, particularly as markets await confirmation that the Fed is prepared to deliver stronger action to stabilize the US economy. Whether the central bank opts for a modest or bold rate cut, the outcome will shape not only the trajectory of the dollar but also the broader direction of global financial markets.