Dollar Dominates: Euro Hits Three-Month Low Amid Fed Uncertainty

The U.S. dollar reached a three-month high against the euro on Monday, spurred by speculation over the possibility of more Federal Reserve rate cuts. The dollar's rise follows Chair Jerome Powell's suggestion last week that, after cutting rates by 25 basis points, further reductions may be postponed without more comprehensive economic data.

The currency markets were also influenced by the ongoing U.S. government shutdown, which has delayed crucial data releases originally scheduled for this week. This delay leaves investors relying on alternative data like ADP employment numbers and ISM PMIs, which might not significantly impact the market outlook.

As uncertainty looms over another rate cut in December, divergent views among Fed policymakers have emerged. While a 70% probability of a further 25 basis point cut remains, Fed Governor Stephen Miran advocates for more decisive action. Meanwhile, the euro slid to its weakest since August against the dollar, while the pound and the yen face their challenges amidst shifting market conditions.