US Dollar Strengthens Ahead of ISM; Oil Markets Firm

The EUR/USD pair ended the session 0.30% lower on Friday, posting losses for a third consecutive day. The euro remains under pressure as the U.S. dollar gains support amid fading expectations for a December rate cut by the Federal Reserve (Fed).

The move follows the Fed’s decision last week to lower its benchmark rate for the second time this year, bringing it to a range of 3.75%–4.00%. Despite the cut, Fed Chair Jerome Powell signaled caution at the post-meeting press conference, noting that another rate reduction in December is “far from certain.” Powell emphasized a “wait-and-see” approach until official economic data releases resume.

According to the CME FedWatch Tool, markets now assign a 69% probability of a December cut—down sharply from 93% just a week earlier.

Meanwhile, investor sentiment remains fragile as the US government shutdown stretches into its sixth week, heightening concerns over the broader economic outlook. Political gridlock persists, with lawmakers deadlocked over a Republican-backed funding bill and no resolution in sight.

On the European front, ECB policymakers struck a cautiously balanced tone. Francois Villeroy de Galhau stated that the central bank is in a “good position” following its October decision but stressed the need for “full optionality” amid ongoing risks from financial markets. He underscored the importance of “agile pragmatism” guided by data and forecasts at future meetings.

Gold prices extended its intraday gains on Monday, rising past the $4,000 psychological mark during Asian trading hours. The advance was supported by renewed safe-haven demand after U.S. President Donald Trump signaled potential restrictions on advanced artificial intelligence (AI) hardware exports to China, heightening geopolitical tensions between the world’s two largest economies.

Lingering concerns over the prolonged U.S. government shutdown, now entering its 33rd day, further underpinned demand for the precious metal. The political stalemate continues amid congressional gridlock over a Republican-backed funding bill, with President Trump urging GOP senators to end the impasse by abolishing the filibuster rule—an idea party leaders have so far resisted.

However, gold’s upside remains capped as the U.S. Dollar (USD) stays firm near its highest level since early August, supported by the Federal Reserve’s hawkish tone.

Looking ahead, attention turns to the U.S. ISM Manufacturing PMI due later Monday, along with remarks from key Fed officials, which could offer fresh direction for both the dollar and gold prices.

Oil prices advanced in Asian trading on Monday after OPEC+ agreed to pause its ongoing production hikes in the next quarter, easing concerns over a potential supply glut. Additional support came from reports of Ukrainian attacks on Russian energy infrastructure, which fueled worries about possible supply disruptions.

The coalition of oil producers—comprising the Organization of the Petroleum Exporting Countries (OPEC) and its allies—announced a modest 137,000 barrels per day production increase for December, matching the pace of hikes in October and November. However, the group said it will pause further increases during the first quarter of 2026, citing concerns about sluggish demand and oversupply risks.

Oil prices also drew support from escalating tensions in the Russia-Ukraine conflict. Ukraine reportedly launched a drone attack on one of Russia’s key Black Sea oil ports over the weekend, part of Kyiv’s strategy to disrupt Moscow’s war efforts by targeting critical energy infrastructure.

The strike followed Russian attacks on Ukraine’s Zaporizhzhia region, which caused widespread power outages. Meanwhile, U.S. sanctions imposed in October on major Russian oil firms have raised expectations of tighter global supply, though traders remain cautious given Moscow’s history of circumventing restrictions.

U.S. stock futures ticked higher on Sunday evening as Wall Street entered November with momentum, following a strong October performance driven by optimism around artificial intelligence (AI), upbeat tech earnings, and signs of easing U.S.–China trade tensions.

All three major indexes ended October higher, extending a six-month winning streak.

The rally was underpinned by investor enthusiasm for AI-related stocks and strong quarterly results from several major technology firms. Amazon.com surged nearly 10% after robust growth in its cloud division and an improved outlook. Microsoft, Alphabet, and Meta Platforms also advanced following better-than-expected earnings.

Market sentiment was further buoyed by the Federal Reserve’s 25-basis-point rate cut last week, lowering the benchmark rate to a 3.75%–4.00% range. While Fed Chair Jerome Powell cautioned that future cuts are not assured, investors viewed the move as a sign the central bank remains focused on supporting growth amid moderating inflation. Hopes of easing trade frictions between Washington and Beijing also lifted confidence.

Investors now turn their focus to another busy earnings week, with about 130 S&P 500 companies set to report.

Advanced Micro Devices headlines Tuesday’s schedule as investors look for updates on AI chip demand following strong results from peers. Uber Technologies and McDonald’s will post results on Wednesday, offering insight into consumer spending and service-sector trends.