On Friday, the dollar index managed to cut its early losses, trading around the 104 mark after experiencing a notable 3% surge throughout October. Traders are currently sifting through a mix of economic data while preparing for the upcoming Federal Open Market Committee (FOMC) monetary policy decision and the presidential election scheduled for next week.

Recent economic reports have stirred concern in the markets. The ISM Manufacturing Purchasing Managers' Index (PMI) fell below forecasts, signaling another significant contraction within the manufacturing sector for October. This contraction is occurring alongside rising price pressures, which could further complicate the Fed's decision-making process.

Additionally, the latest jobs report revealed that the US economy added only 12,000 jobs last month, a stark deviation from the anticipated 113,000. Analysts believe the weak job growth figures have been distorted by recent Boeing strikes and disruptions caused by hurricanes, contributing to a less optimistic outlook for economic recovery.

In light of these developments, traders have fully priced in a 25 basis point reduction in the fed funds rate for next week’s meeting, reflecting growing concerns over economic growth and inflationary pressures. Looking ahead, the odds for another quarter-point reduction in December stand at approximately 83%, suggesting that market participants are preparing for a prolonged period of lower interest rates.

On the political front, the landscape appears competitive, with Republican candidate Donald Trump and Democratic Vice President Kamala Harris closely matched in several polls. This political uncertainty is leading some investors to position themselves for a potential Trump victory, which could introduce further volatility into the markets.

In summary, while the dollar index has stabilized around the 104 level, the market remains on edge as economic indicators suggest ongoing challenges in the manufacturing sector and job growth. As traders brace for the FOMC meeting and the presidential election, their focus on economic data will be crucial in navigating potential market shifts in the coming weeks.