The U.S. dollar index weakened on Wednesday, falling 0.28% as dovish remarks from Susan Collins, President of the Federal Reserve Bank of Boston, reinforced expectations for an interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on October 28–29. Collins stated that with inflation risks easing but labor market concerns rising, it would be “prudent to normalize policy a bit further this year.”
The dollar also faced downward pressure from strong equity market performance, which reduced demand for the greenback as a safe-haven asset. However, the currency trimmed losses after the October Empire State Manufacturing Survey showed a sharp rebound to 10.7—well above forecasts of -1.8. Meanwhile, the Beige Book report noted rising input costs, a hawkish signal that partly offset dovish Fed expectations.
Adding to the headwinds, the ongoing United States federal government shutdown of 2025 is weighing on the dollar, as prolonged disruptions raise economic risks.
The market currently prices in a 98% chance of a 25 basis-point rate cut at the upcoming FOMC meeting.
Euro Rises on Dollar Weakness and ECB Comments
The euro gained 0.24% against the dollar as the greenback softened. Support came from hawkish remarks by European Central Bank Governing Council members Dolenc, Makhlouf, and Nagel, who signaled no need to adjust current interest rates. Political optimism in France also lifted sentiment, with Prime Minister Sébastien Lecornu making budget concessions that may help avoid a no-confidence vote.
However, gains were capped after Eurozone August industrial production fell 1.2% month-on-month, the largest drop in four months. Political uncertainty in France remains a risk, with Lecornu facing a no-confidence vote that could trigger a snap election if unsuccessful.
Yen Strengthens as Safe-Haven Demand Rises
The yen strengthened 0.38% as escalating U.S.-China trade tensions boosted safe-haven flows. Gains were limited after Japan revised August industrial production lower to -1.5%—the biggest decline in nine months. Political instability following a collapse in Japan’s governing coalition also added uncertainty to the outlook.
Gold Hits Record as Safe-Haven Demand Surges
December gold futures rose $38.20 (+0.92%) to a new contract high, while silver climbed 1.5%. Safe-haven demand surged amid U.S.-China trade tensions and the U.S. government shutdown. Dovish comments from Collins further boosted the metal, though hawkish ECB remarks and Beige Book inflation signals limited upside.
ETF inflows continue to support the rally, with gold and silver holdings reaching multi-year highs. Market sentiment remains bullish as geopolitical tensions and Fed easing expectations fuel demand for precious metals.