Dollar Slips on US-China Trade Tensions

On Friday, the dollar index dropped below 99, amid renewed concerns about a potential tariff war. This decline followed comments from U.S. President Trump, who stated there was no reason to meet with China's President Xi Jinping in South Korea in two weeks and suggested an intention to increase tariffs on Chinese imports. Additionally, investors digested the preliminary University of Michigan consumer sentiment report, which indicated consumer morale remained largely unchanged in October, though slightly exceeding expectations. The ongoing U.S. government shutdown is anticipated to extend into the next week, potentially delaying key economic reports, such as the Consumer Price Index (CPI) and labor data, which could affect the Federal Reserve's outlook on rate cuts. Currently, markets are factoring in a 95% probability of a quarter-point rate reduction this month, with the likelihood of a December adjustment decreasing from 90% to 80%. For the week, the dollar was poised to achieve a gain exceeding 1%, bolstered by political instability in France and Japan, which exerted pressure on the euro and yen.

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