US Dollar Near One-Month Low While Oil Falls Over 7% Amid US-Iran Peace Talks
6 min read
Share
The US dollar traded near a one-month low early Tuesday, with the US Dollar Index (DXY) around 101.81, after oil prices fell more than 7% on Monday. Monday's oil-price decline occurred amid reports of potential progress in US–Iran negotiations aimed at ending the conflict and easing pressure on energy supplies. However, oil prices recovered slightly overnight amid reports of strikes on Iran's Qeshm Island, highlighting continued uncertainty surrounding the negotiations.
The sharp decline in oil prices coincided with lower US Treasury yields amid expectations that cheaper energy could ease inflation pressures. Despite stronger economic data, the dollar remained relatively subdued amid uncertainty surrounding the Middle East and the US midterm elections. The euro traded near $1.1206 against the dollar, while sterling remained around $1.3421.
Monday's US manufacturing figures indicated continued economic resilience. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index rose to 55.5 in October from 54.5 in September. Meanwhile, the prices-paid index declined to 75.2 from 77.9, suggesting some easing in factory input-cost pressures. Nevertheless, costs remained elevated, complicating the Federal Reserve's (Fed) assessment of inflation.
Attention now turns to Tuesday's US job openings data, Wednesday's eurozone inflation figures and Thursday's Bank of England (BoE) interest-rate decision. These developments could influence interest-rate expectations and currency movements later this week.
GBP: Sterling Mixed as UK Manufacturing Improves
GBP/USD: 1.3421 | EUR/GBP: 0.8344
Sterling traded close to $1.3421 against the US dollar early Tuesday, remaining relatively steady following stronger UK manufacturing figures. The October Manufacturing Purchasing Managers' Index (PMI) rose to 52.8 from 51.9 in September, while factory output increased at its fastest pace in more than two years. However, manufacturers also reported rising production costs, indicating that inflation pressures remained a concern.
The figures may have reinforced expectations of a Bank of England (BoE) rate hike on Thursday, with economists anticipating a 25-basis-point increase from 3.75% to 4.00%. Nevertheless, the central bank has not committed to raising rates, and its assessment of inflation and economic growth will remain important.
Against the euro, sterling's performance was more mixed. EUR/GBP traded around 0.8344 after the euro recovered during Monday's session. Eurozone manufacturing PMI was revised higher to 52.7 from an initial estimate of 52.4, although it remained below September's 52.9. Investors will assess Wednesday's eurozone inflation figures alongside Thursday's BoE decision for their potential influence on EUR/GBP.
Key technical reference levels for GBP/USD: Resistance sits near 1.3465, followed by 1.3558, while support sits around 1.3385, followed by 1.3320.
Key technical reference levels for EUR/GBP: Resistance sits near 0.8360, followed by 0.8380, while support sits around 0.8320, followed by 0.8300.
EUR: Euro Gains Fade Despite Factory Expansion
EUR/USD: 1.1206
The euro traded around $1.1206 against the US dollar early Tuesday after giving back some of Monday's gains. EUR/USD briefly reached approximately 1.1237 on Monday but failed to maintain that level, despite encouraging eurozone manufacturing figures. October's final Manufacturing Purchasing Managers' Index (PMI) was revised higher to 52.7 from an initial estimate of 52.4, although it remained slightly below September's 52.9.
The survey showed that manufacturing activity expanded in six of the eight countries monitored, while France and Italy continued to report contraction. Export orders increased at their fastest pace in more than four years. However, factory input costs rose at their quickest rate in five months amid continued energy-price and supply-chain pressures.
These mixed conditions could influence the European Central Bank's (ECB) next interest-rate decision. Although stronger manufacturing activity suggests resilience, persistent inflation pressures could strengthen expectations of a December rate hike. Investors will be watching Wednesday's preliminary eurozone inflation figures for further evidence of how price pressures are developing.
Key technical reference levels for EUR/USD: Resistance sits near 1.1220, followed by 1.1250, while support sits around 1.1160, followed by 1.1135.
USD: Dollar Subdued Despite Stronger Factory Activity
DXY: 101.80
The US dollar remained relatively subdued early Tuesday, with the US Dollar Index (DXY) trading around 101.80 after reaching a one-month low on Monday. The dollar's subdued performance coincided with lower US Treasury yields following Monday's sharp decline in oil prices. However, uncertainty surrounding the US-Iran negotiations and the upcoming midterm election results continued to influence investor sentiment.
Monday's US manufacturing figures showed stronger activity despite continued price pressures. The Institute for Supply Management (ISM) Manufacturing PMI increased to 55.5 in October from 54.5 in September, while the new orders index edged higher to 55.5 from 55.3. The employment index eased slightly to 52.4 from 52.7, indicating that factory employment continued expanding, although at a slower pace.
Meanwhile, the prices-paid index declined to 75.2 from 77.9, suggesting some moderation in manufacturing costs. Nevertheless, the reading remained elevated, indicating that inflation pressures had not fully eased. This combination of stronger economic activity and persistent costs could influence expectations for the Federal Reserve's (Fed) December interest-rate decision.
Investors will now assess Tuesday's US job openings report and the developing midterm elections. Both could influence Treasury yields, Fed rate expectations and the dollar's direction in the coming sessions.
Other Currencies: Australian Dollar Weakens Following RBA Rate Hike
AUD/USD: 0.6975 | NZD/USD: 0.5616 | USD/JPY: 157.81 | GBP/JPY: 211.69
The Australian dollar weakened against the US dollar early Tuesday, with AUD/USD trading near 0.6975 after the Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.85%. This was the fifth rate hike of 2026, bringing borrowing costs to their highest level since 2008. Despite the increase being widely expected, the Australian dollar declined as investors assessed the central bank's policy outlook.
The decision revealed a divided RBA board, with six members supporting the rate hike and three preferring to leave rates unchanged. Policymakers also removed earlier language suggesting further increases might be necessary. Governor Michele Bullock indicated that a pause could allow the bank to assess the impact of previous rate hikes, although inflation risks remained elevated. The Australian dollar's decline occurred amid speculation that the RBA could leave rates unchanged at its December meeting.
Meanwhile, the New Zealand dollar remained relatively stable, with NZD/USD trading around 0.5616. The Japanese yen also showed limited movement, with USD/JPY near 157.81 and GBP/JPY around 211.69. The RBA's interest-rate decision was a key development for the Australian dollar during the reporting period.
Current Rate Table
| Currency Pair | Rate | Trend |
|---|---|---|
| GBP/USD | 1.3421 | Consolidation |
| EUR/GBP | 0.8344 | Mildly bullish EUR |
| EUR/USD | 1.1206 | Mildly bullish EUR |
| USD/JPY | 157.81 | Range-bound |
| AUD/USD | 0.6975 | Bearish AUD |
| NZD/USD | 0.5616 | Neutral |
| USD/CAD | 1.3970 | Neutral to bearish USD |
Market Lookahead
Tuesday, Nov 03
- US JOLTS Job Openings (Sep)
Wednesday, Nov 04
- Eurozone HICP & Core HICP (Oct)
- US ISM Services PMI (Oct)
Thursday, Nov 05
- BoE Interest Rate Decision & Monetary Policy Report
- US Initial Jobless Claims
Friday, Nov 06
- CAD Employment Change & Unemployment Rate (Oct)
- US Average Hourly Earnings (Oct)
- US Nonfarm Payrolls (Oct)
Stay Ahead in the Currency Game
Whether you're a daily FX trader or handle international transactions regularly, our 'Currency Pulse' newsletter delivers the news you need to make more informed decisions. Receive concise updates and in-depth insights directly in your LinkedIn feed.
Subscribe to 'Currency Pulse' now and never miss a beat in the currency markets!
Ready to act on today’s insights? Get a free quote or give us a call on: +44 (0)20 7740 0000 to connect with a dedicated portfolio manager for tailored support.
Important Disclaimer: This blog is for informational purposes only and should not be considered financial advice. Currency Solutions does not take into account the investment objectives, financial situation, or specific needs of individual readers. We do not endorse or recommend any specific financial strategies, products, or services mentioned in this content. Forward contracts can help businesses manage foreign exchange exposure by providing greater certainty over future exchange rates, although they may also mean that businesses do not benefit from favourable exchange-rate movements. Businesses should consider their individual circumstances and speak with their dealer to understand how forward contracts may support their specific foreign exchange requirements. All information is provided “as is” without any representations or warranties, express or implied, regarding its accuracy, completeness, or timeliness.
