Forex Today: Dollar loses traction ahead of mid-tier data

Here is what you need to know on Tuesday, November 1:

The dollar is having a difficult time finding demand on Tuesday with market participants reassessing their positions ahead of Wednesday's all-important Fed policy announcements. The US Dollar Index trades in negative territory near 111.00 in the early European morning and US stock index futures gain between 0.4% and 0.6%, pointing to an improving market mood. Finally, the benchmark 10-year US Treasury bond yield continues to fluctuate above 4%. The US economic docket will feature the ISM's Manufacturing PMI survey for October and JOLTS Job Openings data for September. 

During the Asian trading hours, the Caixin Manufacturing PMI data for China improved to 49.2 in October from 48.1 in September and this reading came in slightly above the market expectation of 49. Following Monday's uninspiring performance, the Shanghai Composite Index gathered bullish momentum and remains on track to post nearly 2% of daily gains. 

Following its November policy meeting, the Reserve Bank of Australia (RBA) announced early Tuesday that it hiked its policy rate by 25 basis points (bps) to 2.85% from 2.6% as expected. The RBA noted in the policy statement that the board expect to increase rates further over the period ahead but acknowledged that higher interest rates and higher inflation were putting pressure on the budgets of many households. Despite the relatively small rate increase, AUD/USD benefited from risk flows and was last seen trading near 0.6450, where it was up 0.7% on the day. 

RBA: Higher interest rates and higher inflation are putting pressure on the budgets of many households.

EUR/USD failed to capitalize on hot inflation data from the euro area on Monday but managed to turn north early Tuesday amid broad-based selling pressure surrounding the greenback. At the time of press, the pair was up 0.5% on the day at 0.9935.

Following Monday's sharp decline, GBP/USD staged a rebound and climbed toward 1.1550. In a report published late Monday, the Financial Times said that British Prime Minister Rishi Sunak was set to sign off on raising taxes across the board.

After having gained nearly 100 pips on the first trading day of the week, USD/JPY reversed its course and was last seen losing 0.6% on a daily basis below 148.00. Japanese Finance Minister Shunichi Suzuki reiterated on Tuesday that they are closely watching currency market moves with a high sense of urgency and that they would respond appropriately to excessive fluctuations.

Gold lost more than 0.5% on Monday but erased all of those losses early Tuesday. XAU/USD is currently trading in positive territory above $1,640.

Bitcoin registered modest losses on Monday but managed to close comfortably above $20,000. BTC/USD is struggling to gather bullish momentum but clings to modest daily gains near $20,600 early Tuesday. Ethereum is up more than 1% so far as it looks to stretch higher while holding above $1,500.