Solid Gold Berjangka – The US Dollar Index (DXY) continued its decline for the second straight day, hitting a monthly low near 101.20 during Asian trading on Thursday (November 5). Pressure on the dollar intensified following the Democratic Party's victory in the US midterm elections, which shifted the political landscape in Washington. Meanwhile, a drop in global oil prices further weighed on the US currency.
The Democratic Party’s success in securing control of both chambers of Congress has fueled market concerns regarding potential political gridlock between Congress and the administration of President Donald Trump. Such a scenario could limit the government's ability to pursue its fiscal agenda, including spending policies and other economic programs. This sentiment has triggered selling pressure on the US dollar.
Pressure on the dollar has also emerged from the energy market. Expectations that the conflict in the Middle East might soon de-escalate have led to a sharp decline in global oil prices. Lower oil prices have eased concerns regarding inflationary pressure from the energy sector, acting as a factor that suppresses yields and diminishes the appeal of the US dollar in the global market.
Nevertheless, the potential for a dollar recovery remains, as several US economic data points have demonstrated resilience. An ADP report indicated that the private sector added 86,000 jobs in October—surpassing market expectations of 69,000. Meanwhile, the ISM Services PMI fell to 54.5 from 54.9; while slightly below the forecast of 54.8, it remains above the 50-point threshold, signaling that the US service sector continues to be in an expansionary phase.
These relatively solid economic figures have reinforced expectations that the Federal Reserve (The Fed) still has room to raise interest rates. According to the CME FedWatch Tool, the market is pricing in an approximately 82% probability of an interest rate hike in December. Investor attention now turns to the U.S. Initial Jobless Claims data, to be released on Thursday, and the Nonfarm Payrolls (NFP) report on Friday. Both sets of data will serve as key indicators regarding the strength of the labor market and the likely future direction of the Federal Reserve’s monetary policy. (srh)