The US Dollar is on the rise, benefiting from last week’s momentum, according to BBH FX analysts. This week’s US private-sector data may provide insights into the employment and inflation landscape, with positive labour data potentially boosting USD further, while weaker data could prompt a partial USD pullback.

The focus is on US October ISM manufacturing data (3:00pm London, 10:00am New York). The headline index is expected at 49.5, up from 49.1 in September, indicating a slower contraction. Attention should be paid to prices paid and employment sub-indexes for signs of easing inflation risks and moderating job losses.

Federal Reserve Insights

Fed Governor Lisa Cook will discuss the economy and monetary policy (7:00pm London, 2:00pm New York), following San Francisco Fed President Mary Daly’s participation in a discussion (5:00pm London, 12:00pm New York). Fed Chair Jay Powell notes a supportive sentiment towards avoiding a rate cut, echoed by Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack, who preferred to maintain rates last week.

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As of today, November 3rd, 2025, the US Dollar is showing strength, and we expect this trend to be tested by incoming data. This week’s private-sector reports are critical for gauging the health of the labor market and inflation. A strong set of numbers could push the dollar higher, while any weakness may cause a temporary retreat.

The October ISM manufacturing report, which was just released, showed a slower contraction than last month with a headline figure of 49.8. More importantly, the prices paid sub-index jumped to 52.0, the highest reading since July 2025, suggesting inflationary pressures are not fading as quickly as hoped. This data supports the more cautious members of the Federal Reserve.

Market Strategies

There is a growing disagreement within the Fed about the path for interest rates. The market is currently pricing in a 60% probability of a rate cut by January 2026, but we hear a rising number of Fed officials arguing to hold rates steady. The speeches later today from Fed Governors Cook and Daly will be watched very closely for any shift in tone, especially since we saw the administration apply political pressure back in August 2025.

Given this uncertainty, we believe derivative traders should consider buying volatility. The VIX index, a measure of expected market volatility, has already risen from 16 to 19 over the past month. We are positioning for a potential hawkish surprise by purchasing out-of-the-money call options on the US Dollar Index for early 2026.

The next major event will be the October non-farm payrolls report this Friday. Economists are forecasting a gain of around 150,000 jobs, a figure that would echo the moderate job growth we saw back in October of 2023. If that number comes in significantly higher, it will likely force markets to aggressively re-evaluate the chance of a rate cut and send the dollar even higher.

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