The US Dollar (USD) rallied to a fresh high since April 2025, driven by safe-haven demand amid escalating geopolitical tensions in the Middle East and disappointing US labor market data, impacting major currency pairs and commodities [3][4][5]. The USD/CHF pair traded around 0.8310 during Asian hours on Monday, appreciating due to increased safe-haven flows following Saudi-backed forces' offensive in Yemen and the Iran-aligned group's seizure of the Bab el-Mandeb strait, a key maritime chokepoint [5]. Meanwhile, the EUR/USD pair broke below the 1.1200 mark, hitting its lowest level since May 2025 and trading just above 1.1150, down around 0.85% for the day, pressured by France's rising debt-to-GDP ratio (expected to climb to 122% next year from 119% this year), political uncertainty ahead of elections, and surging French 10-year bond yields above 4.9% [4].
US Nonfarm Payrolls expanded by only 29,000 positions in September, well below the consensus estimate of 90,000 and August's revised figure of 133,000. The unemployment rate edged higher to 4.2% from 4.1%, and annual wage growth slowed to 3.0%, matching the lowest pace since May 2021 [3][5]. These softer employment figures led financial markets to price in a 77.9% chance that the Federal Reserve will keep rates steady at its next meeting, up from 74% before the report [5]. Analysts at ABN Amro and TD Securities expect the Fed to delay further rate hikes, with ABN Amro anticipating a December hike due to persistent inflationary pressures from energy shocks, while TD Securities sees a more gradual hiking cycle, with increases likely in December and March rather than October and January [3][5].
The Euro continued its losing streak, with EUR/JPY trading around 176.70 and testing the lower boundary of its descending channel, signaling bearish momentum. The 14-day RSI at 27.00 indicated oversold conditions, and the pair remained below key EMAs, suggesting downside pressure [2]. The Euro was the weakest major currency against the US Dollar, falling 0.71% on the day [2]. Concerns about France's debt and political gridlock, as well as proposals from far-right leader Marine Le Pen for tax cuts and lowering the retirement age, further undermined the Euro [4].
Gold (XAU/USD) traded just below $4,150, nearly unchanged, as the USD's strength capped gains despite receding Fed hike bets and ongoing geopolitical risks. The commodity found some support from lower US bond yields, but uncertainties in the Middle East and Russia-Ukraine conflict boosted the safe-haven Greenback [3].
In the Asia-Pacific region, AUD/JPY traded in negative territory around 109.70, with technical bias remaining bearish. The probability of an RBA rate hike in November fell to around 20% after CPI data met expectations, and money markets now expect the RBA to leave rates unchanged [1]. In Japan, focus shifted to upcoming BoJ communication and wage data, with analysts expecting headline labor cash earnings growth to slow to 3.7% from 4.3%, but underlying base-pay momentum to remain firm, keeping prospects for further monetary tightening alive [1]. BoJ officials also flagged AI as a structural force that could justify tighter policy over time, mildly supporting the Yen [2].
CONCLUSION
The US Dollar's surge to a yearly high has triggered broad declines in the Euro, Swiss Franc, and commodity prices, with market sentiment shifting toward delayed and more gradual Fed rate hikes amid soft US jobs data. Geopolitical tensions and European debt concerns are amplifying safe-haven flows, further strengthening the USD. The outlook remains cautious, with analysts expecting continued volatility and gradual policy normalization from central banks.