The ISM Manufacturing index for October rose to 55.5 from 54.5 in September, beating the 54.6 forecast — the second-fastest expansion of the sector in nearly four years. The production sub-index jumped to 59.0 from 56.7, while new orders continued to rise to 55.5. For the dollar, this is the signal the market has been waiting for — the industrial slowdown that worried investors earlier this autumn has not only stopped but turned into a confident upswing. A strong ISM traditionally supports the currency via expectations of tighter policy, and this time the correlation worked without delay.
The services sector did not surprise: the PMI for October came in at 54.9, essentially unchanged from September and slightly above forecasts. Resilient services alongside accelerating manufacturing paints a picture of an economy that doesn't want to cool — not the most comfortable backdrop for the Fed, but very favorable for the dollar.
The employment report for October was the week's main event. Nonfarm payrolls rose by 165,000 — more than double expectations of roughly 60–70,000 — and August and September were revised up by a combined 84,000. The unemployment rate fell to 4.1% from 4.2%, and average hourly earnings rose 0.4% month-on-month.
The aggregate long position in the US dollar against major currencies fell during the reporting week to $36.1 billion — a third consecutive weekly decline, but the reduction was modest, and the dollar's bullish tilt remains substantial. The drop in the aggregated position reflects not a flight from the dollar but the closing of short positions in several currencies.
The main political event of the week was the midterm elections. After the Democrats' victory, the dollar index fell to 101.2 — the low since late September. That reaction proved short-lived: by the end of the week, after the nonfarm report, the index had recovered. The stock market took the news relatively calmly at first but then began to reassess the implications for the AI sector. The main risk is that Congress could tighten AI regulation and restrict data-center construction. On Thursday, November 5, the Nasdaq-100 plunged 6.4% — its biggest one-day drop since March 2020. The Philadelphia Semiconductor Index tumbled 12.25%, and the total market capitalization of the US market has lost about $5.7 trillion from the October 6 peak.
In the short term, the dollar may correct and is likely to weaken in the coming days, but strong US data and rising Fed rate expectations suggest the dollar will end the year higher than current levels.