Investing.com – The US dollar strengthened on Monday, heading for a significant monthly gain, while the euro remained stable at the start of an eventful week.

At 05:35 ET (09:35 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading broadly unchanged at 104.147 but was on track to gain about 4%, the sharpest monthly gain from April 2022

Demand for the dollar at the beginning of a key week

The dollar has been in high demand recently due to growing expectations for smaller interest rate cuts in the US based on relatively good economic data.

This sentiment will likely be put to the test this week when US data is released on Wednesday and, more importantly, on Friday.

Friday’s jobs report is expected to show job growth slowed to a more modest 111,000 in October, reflecting the impact of strikes and weather disruptions caused by hurricanes Helene and Milton.

The Fed has already signaled its intention to cut interest rates by 25 basis points at its November meeting after cutting 50 basis points in September, but this week’s economic data could still have some influence on that decision.

The dollar was also buoyed by the perceived increased likelihood of former President Donald Trump returning to the White House as this week will be the last full week before the November 5 US presidential election.

Republican presidential candidate Donald Trump and his Democratic rival, Vice President Kamala Harris, are tied in national and swing polls, but the former president is the slight favorite in election prediction markets.

This week will also see key earnings releases for five of America’s “Magnificent Seven” titans: on October 29 – Google parent Alphabet (NASDAQ:), Microsoft (NASDAQ:) and Facebook’s (NASDAQ:) parent Meta Platforms on October 29. on October 30 and Apple (NASDAQ:) and Amazon (NASDAQ:) on October 31.

The euro means a huge monthly loss

In Europe, it rose 0.2% to 1.0819, with the euro posting a monthly loss of around 3% amid concerns about frail regional growth prospects.

The Monetary Policy Council has already cut interest rates three times this year, by 25 basis points each time, but expectations are growing that the central bank will consider a larger cut at its next meeting.

These expectations could escalate this week if the annual interest rate due on Thursday is once again confirmed below the ECB’s target of 2.0%.

the rate rose 0.1% to 1.2973, heading for a weekly loss of around 0.5%, also trending to a 3% monthly loss.

The modern Labor government unveils its first government in the UK on Wednesday, with markets fearing that Finance Minister Rachel Reeves will start borrowing more and collecting taxes, balancing high debt, public spending promises and a promise not to escalate income tax.

Weakening of the yen due to political changes

rose 0.5% to 153.09, staying near three-month highs, and the Japanese yen fell to a three-month low after the weekend’s general elections.

Reports indicate that the coalition led by Japan’s ruling Liberal Democratic Party failed to win a majority in Sunday’s parliamentary elections.

To maintain power, the LDP will have to seek coalitions with smaller regional parties – a scenario that presents a more divided political outlook for Japan.

Traders were betting that increased political uncertainty would prevent further interest rate increases starting later this week – a scenario that bodes ill for the yen.

rose 0.2% to 7.1305, its highest level in more than two months, ahead of the release of China Purchasing Managers’ Index data later in the week.