The US dollar remains under pressure, hovering close to session lows in late European trading, while overall market news flow stays limited due to the ongoing US federal government shutdown. Asian participation is lighter as mainland Chinese markets are closed for holidays. Within the G10, the Canadian dollar continues to lag, despite the softer greenback. Emerging market currencies are mostly stronger, though the Argentine peso extended its decline for the third day after last week’s steady gains. Gold demand remains solid, with prices set to challenge the recent record peak near $3895. Equity performance is broadly positive, led by South Korea, while oil prices hold above $61.

Asia Pacific Markets

In Japan, the dollar has been retreating steadily after approaching the JPY150 mark late last week, falling as low as JPY146.60. Pressure came after weak US employment data pushed Treasury yields lower. The yield gap between US and Japanese 10-year notes has narrowed to around 245 basis points, its tightest since April 2022, reflecting easing dollar strength. The Bank of Japan remains on track to raise rates if growth and inflation develop as anticipated.
In Australia, the local dollar has been consolidating above $0.6600, supported by option expiries. However, weaker trade surplus data and slowing household spending highlight economic fragility, tempering expectations of near-term monetary easing.

European Markets

The euro tested but held just under key retracement levels near $1.1780. The yield gap between US and German two-year bonds narrowed sharply, marking its biggest single-day move in over a month. Meanwhile, eurozone unemployment steadied at 6.3%, consistent with its long-term average.
In the UK, sterling briefly pushed above $1.3525, reclaiming half of its recent Fed-driven losses. Supportive sentiment is underpinned by the UK’s relative rate advantage, with its two-year premium over US yields holding above 44 basis points. This marks a notable shift from August, when UK yields traded at a discount.

American Markets

The Dollar Index has been sliding, falling for four consecutive sessions — its longest losing streak since June. Currently, it trades just above the 97.40 retracement level, leaving it vulnerable to further declines. Sentiment weakened after a disappointing ADP employment report, which showed job losses for a second straight month and included downward revisions to prior data. Investors now see higher odds of another Federal Reserve rate cut at the month’s end. Manufacturing indicators remain mixed: while ISM improved slightly, it continues to signal contraction, with employment and new orders under 50. Inflation pressures remain elevated, though the pace of price increases has moderated