Dollar Gives Up Early Gains as Stocks Rebound

Core Points - The dollar index (DXY) fell from a 5.25-month high, finishing down by -0.05% due to a recovery in stocks and ongoing pressure from the US government shutdown [1] - The US October ADP employment change rose by +42,000, exceeding expectations of +30,000, which initially supported the dollar [3] - The October ISM services index increased by +2.4 to 52.4, surpassing expectations and indicating the fastest pace of expansion in 8 months, although price pressures in the service sector accelerated [4] Dollar Performance - The dollar initially gained strength due to positive employment data and a rise in the ISM services index, but later lost ground as liquidity demand decreased [1][2] - The dollar's performance was also influenced by a report suggesting that some Senate Democrats are considering voting to end the government shutdown, providing additional support [3] Euro Performance - The EUR/USD pair recovered from a 3-month low, finishing up by +0.08% as short covering lifted the euro after the dollar's decline [5] - Positive Eurozone economic indicators, including an upward revision of the S&P composite PMI and a significant rise in German factory orders, contributed to the euro's strength [5] Central Bank Divergence - Central bank divergence is seen as supportive for the euro, with the ECB expected to be largely finished with its rate-cut cycle, while the Fed is anticipated to cut rates several more times by the end of 2026 [6]