The US Dollar experienced gains, reaching around 98.2 on the dollar index. This increase occurred as the government shutdown extended into its seventh day and markets priced in expected Federal Reserve rate cuts. The dollar also benefited from weakness in the Euro and Yen.
- The dollar index rose to around 98.2.
- The government shutdown entered its seventh day.
- Democratic and Republican funding proposals failed in the Senate.
- Markets are nearly fully pricing in a quarter-point Fed rate reduction this month and another in December.
- Traders await remarks from Fed Governor Stephen Miran and Chair Jerome Powell.
- The dollar drew support from Euro and Yen weakness.
- France’s new government resigned.
- Japan’s ruling party elected a dovish leader.
The confluence of a domestic political impasse, anticipated monetary policy easing, and external currency struggles appears to be creating a supportive environment for the US Dollar. While a government shutdown might typically weaken a currency, the expectation of rate cuts to stimulate the economy, coupled with instability in other major economies, is currently outweighing the negative impacts. This situation presents a complex dynamic for the dollar in the near term.