US Dollar Index on the Rise

The US Dollar Index (DXY) increased by 0.8%, reaching about 98.45. In the US, potential job cuts are causing concern due to a government shutdown. President Trump has confirmed that layoffs are coming. Another factor influencing the US Dollar is the Federal Reserve’s cautious approach. The CME FedWatch tool shows an 84% chance of two more rate cuts of 25 basis points each in the remaining meetings of the year. The Australian Dollar is currently doing better against the US Dollar, largely because expectations of the Reserve Bank of Australia (RBA) cutting interest rates have decreased, thanks to a strong job market. The AUD/USD pair is currently trading in a narrow range around 0.6600. The Australian Dollar is supported by a solid job market, with unemployment holding steady at 3.8% according to September 2025 data from the Australian Bureau of Statistics. This strength lowers the chances of the RBA cutting rates, but the US Dollar’s strength limits the upside for the pair. The US Dollar’s strength comes from a rush to safety amid political instability in France and the US government shutdown. We have seen a similar situation before; the 35-day shutdown from 2018 to 2019 cost the US economy an estimated $11 billion, raising fears of a recession. This time, uncertainty is boosting the dollar, despite the market anticipating an 84% chance of two more rate cuts by the Federal Reserve before the year ends.

Strategies for Traders

This situation creates a tense atmosphere where short-term fears outweigh long-term monetary policy expectations. For traders, this suggests that implied volatility will likely stay high in the coming weeks. Options strategies like straddles could be effective in navigating the uncertainty around the Fed’s upcoming meeting in November they profit from large price moves in either direction. It’s also smart to look at currency crosses to avoid distractions from the US Dollar. The Australian Dollar’s strength, driven by its job market, appears clearer against the Euro, which is weakened by the political crisis in France. The AUD/EUR pair could provide a better opportunity to take advantage of the Australian economy’s relative strength. The remarkable rise in gold prices to over $3,900 an ounce shows how fearful the market is, similar to the panic experienced during the 2020 global pandemic. As long as gold remains this high, it signals that any strength in risk-sensitive currencies like the Australian Dollar may be temporary. This environment favors strategies that are long volatility or focused on further safe-haven investments. Create your live VT Markets account and start trading now.

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