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Overview: The US dollar is beginning the new month on a firm note. It has edged higher against most currencies. Among the G10, the Australian dollar and Norwegian krone are leading the pack with negligible gains. Among emerging market currencies, the Mexican peso's gain of around 0.15% puts its atop the complex. The news stream is light and mostly features the final manufacturing PMI reading. 

OPEC+ agreed to boost output by 137k barrels a day next month and then hold for Q1 26. December WTI is little changed now. It initially extended the pre-weekend gains to $61.50 but sellers pressed it back below $61.00. China adjusted its tax on gold, seemingly encouraging purchases on the Shanghai exchanges or from the central bank. Gold is little changed but slightly softer. Equities are rallying. Japan's markets were closed so they did not participate in today's broad advance, led by the 2.8% rally in South Korea's Kospi. Europe's Stoxx 600 is snapping a four-day drop and is up around 0.4% in late morning dealings. The S&P 500 and Nasdaq futures are 0.3%-0.5% better. Benchmark 10-year bond yields are a little firmer in Europe; most of up less than a single basis point. The 10-year US Treasury yield, which rose almost eight basis points last week, is up another basis point today to near 4.09%. 

USD: The Dollar Index finished October at its best level since August 1. It rose by about 2.1% last month. It has extended its gains today to around 99.90. The next immediate target is the 100.00-100.25 area. The 200-day moving average is near 100.40. Although the US federal government remains closed, it is an important week for data; from the private sector, including the final PMI, ISM, auto sales, and the University of Michigan's preliminary October survey. ADP will also report its estimate of private sector jobs growth. Auto sales are expected to have slowed to around 15.5 mln unit annual pace, which would be among the slowest this year, while the ADP estimate is seen around 25k after a 32k decline in September. The Supreme Court hears the arguments over the administration's use of emergency powers for many of the tariffs it has imposed, and market will glean insight into the court's leanings by the questions that are asked. 

EURO: The euro was sold to a new low for October ahead of the weekend near $1.1520. It has seen $1.1510 in Europe today. A break of the $1.1490 area warns of risk to the late July/early August lows near $1.1400. Still, the close below the lower Bollinger Band is a sign that it is stretched. The final October manufacturing PMI aggregate reading was 50.0, the same as the preliminary reading. While this was true of the Germany report (steady at 49.6), the French manufacturing PMI improved to 48.8 from 48.3, initially. Spain and Italy's manufacturing PMI improved more than expected (52.1 vs. 515 in Spain and 49.9 vs. 49.0 in Italy). With the ECB out of the picture for a while, the euro may be less sensitive to the upcoming data. That said, Germany reports factory orders, industrial output, and trade figures this week. 

CNY: The broader greenback gains helped lift it for a third consecutive session against the offshore yuan before the weekend. It has edged a little higher today to reach almost CNH7.1270, a six-day high and frayed the 20-day moving average for the first time since mid-October. Nearby resistance is seen in the CNH7.1300 area. Above there, potential may extend into the CNH7.1450-CNH7.1500 area. Meanwhile, the PBOC's dollar reference rate has fallen for the past four weeks. It was set at CNY7.0867 today (CNY7.0880 previously). China saw RatingDog (formerly Caixin) manufacturing PMI earlier today. It slipped to 50.7 from 51.2 but continues to run above the official one from the China Federation of Logistics and Purchasing, which has not been above 50 since the end of Q1.

JPY: The combination of the hawkish cut by the Federal Reserve last Wednesday and the Bank of Japan's continued reluctance to hike rates helped lift the dollar to JPY154.45 last Thursday. The greenback consolidated before the weekend, and although a new high was not recorded, it held above JPY153.65. It is trading quietly in a JPY154.00-30 range today, but the consolidation looks like a pause before another leg higher. A band of resistance extends from JPY154.50 to JPY155.00. Japan's markets were closed today for Culture Day, and when they re-open tomorrow, the final October manufacturing PMI will be reported. Instead of the PMI, which typically is not a market-mover in Japan, the labor earnings and household spending figures on Thursday and Friday are more important. Both are expected to have risen further on a year-over-year basis. Data at the end of last week showed that activity improved in September after a poor August. And Tokyo's October CPI warns of a firm national reading. The weakness of the yen and the better economic data will likely see speculation increase for a hike at the next BOJ meeting in December. The swaps market is discounting a little less than 50% chance of a hike. While this is slightly higher than a week ago, at the end of September, there was around an 80% chance of a hike in Q4. 

GBP: Sterling fell to new six-month lows ahead of the weekend, slightly below $1.3100 and is holding above there so far today. It is risen once in the past two weeks. It settled below its lower Bollinger Band for the third consecutive session at the end of last week. There are options for about GBP470 mln that expire at $1.3100 today. Follow-through selling could target the $1.2950-$1.3000 area. The final October manufacturing of PMI 49.7 was in line with the preliminary estimate (49.6) and improved from 46.2 in September. Still, it has not been above 50 since the end of Q3 24. The highlight of the week is the Bank of England meeting on Thursday. The swaps market is pricing in around a 1-in-3 chance of a cut, which seems high. It was seen as near a 1-in-10 proposition at the end of September. 

CAD: After falling a little below CAD1.3890 after the Bank of Canada's hawkish rate cut in the middle of last week, the US dollar stormed back and made a new high for the week before the weekend near CAD1.4035. It has made a marginal new high today near CAD1.4040. The greenback looks poised to challenge the recent high near CAD1.4080 and a break could target the CAD1.4165 area. S&P does not provide a preliminary estimate of Canada's PMI, so today's manufacturing report is new information. Yet, the market's reaction is likely to be minimal as it will not really tell participants anything it does not know. The Canadian economy is in a soft patch. The manufacturing PMI was last above 50 in January. The market may be more sensitive to Bank of Canada Governor Macklem's fireside chat at 1:30 PM ET today. The market suspects the monetary easing cycle is over. Macklem may want to preserve some optionality. Canada's trade data that was due tomorrow is being postponed because of the lack of US data. It could also impact the Q3 GDP report, scheduled for November 28. The highlight of the week is the jobs data on Friday. It is more difficult to imagine a better jobs report than the September reading that saw 106k full-time jobs were created. 

AUD: The Australian dollar peaked in the middle of last week near $0.6620 and was sold to almost $0.6530 in the second half of the week. It settled last week poorly but is consolidating quietly mostly between $0.6540 and $0.6560. The immediate downside risk extends to $0.6500. A break of it could spur a return to October's low around $0.6440. S&P confirmed that Australia's October PMI slipped below 50 for the first time this year (to 49.7 vs. 51.4 in September). September's household spending was also reported. The 0.2% rise was weak; half of what was expected, and the August series was revised to flat from 0.1%. Household spending averaged 0.4% increase a month through August and averaged 0.3% in the first eight months in 2024. Still, there is little chance that the Reserve Bank of Australia cuts rates at tomorrow's meeting. The swap market implies target rate of 3.40% (3.60% currently) at the end of next year, which is almost 30 bp above where it was as recently as October 20. 

MXN: The short-dollar long Mexican peso was a popular carry-trade strategy. It was particularly profitable this year through September. It returned almost Mexico about 21.5% for dollar-based investors between the peso's appreciation (13.7%) and about 6.8% in the interest rate pick-up. The dollar bottomed on September 17 after the FOMC cut rates, near MN18.20. Since then, US dollar-based investors have experienced a small loss through the end of last week. The carry has not been sufficient to cover the peso's weakness. It is consolidating within last Thursday's range so far today (~MXN18.45-MXN18.6050). Options for about $355 mln at MXN18.60 expire today. A move through last week's high near MXN18.6050 could target the MXN18.70 area, and possibly the September high around MXN18.8650. October's manufacturing PMI today and the IMEF surveys. It is clear that the Mexican economy is weak, and this is the reason the central bank will continue its easing cycle this week. Worker remittances, the country's most important source of hard currency, will also be reported today. Through August, they have totaled about $40.5 bln, which is down about 6% from the first eight months of 2024. However, the trade deficit has also narrowed. In January-August, Mexico recorded a cumulative trade shortfall of almost $530 mln compared with a deficit of nearly $18 bln in the year ago period. The central bank meets on Thursday. The swaps market has a cut fully discounted. All 15 economists Bloomberg surveyed also expect a cut. The swaps market has another cut discounted for next year. On Friday, October CPI will be reported. Even the small softening the market expects will keep price pressures elevated. 

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