The US Dollar experienced a significant upswing, poised for its best weekly performance in a year. This strength is fueled by considerable weakness in both the Japanese Yen and the Euro, while domestic factors such as a government shutdown and evolving Federal Reserve rate cut expectations also contribute to the overall picture.
- The dollar index held above 99.3 and is on track to rise nearly 2% for the week.
- The yen is poised to drop almost 4% against the dollar this week due to expectations of higher spending and loose monetary policy in Japan.
- The euro has fallen about 1.5% versus the dollar amid political turmoil in France.
- The US government shutdown extended into its ninth day, delaying key economic data.
- Markets see a 95% chance of a quarter-point rate cut this month.
- Odds for a December rate cut have eased to 80% from 90%.
The dynamics at play suggest a potentially favorable short-term outlook for the US Dollar. International currency weakness, particularly in the Yen and Euro, provides external support. While domestic factors introduce some uncertainty, the overall environment leans towards continued dollar strength.