The dollar experienced a decline on Monday in anticipation of numerous U.S. economic reports that may offer additional insight into the Federal Reserve’s interest rate trajectory, while the increasing likelihood of a U.S. government shutdown also became a significant concern. The Asian session saw relatively muted currency movements, although the dollar relinquished some of its gains following a stronger performance last week, which was supported by diminished expectations for Fed rate cuts.
The dollar experienced a decline of 0.4% against the yen, settling at 148.94, following a rise of over 1% against the Japanese currency in the previous week. The euro increased by 0.28% to $1.1731, whereas sterling advanced by 0.27% to $1.3439. The dollar index decreased by 0.22% to 97.93, following a 0.5% increase last week. Investors are increasingly concerned about a potential U.S. government shutdown if Congress does not approve a funding bill by the end of the fiscal year on Tuesday. In the absence of funding legislation, certain segments of the government are set to shut down on Wednesday, marking the commencement of its 2026 fiscal year. The release of Friday’s closely-watched nonfarm payrolls report would carry significant implications.
“It is my belief that the prevailing assumption will be that in the event of a government shutdown, the payroll numbers will not be released.” How does one approach trading in the absence of a numerical release? “You can’t,” stated Ray Attrill. The Federal Reserve meeting is scheduled for the end of October. It appears that the prevailing assumption is that, should we enter a shutdown, we can optimistically expect it to be of a limited duration. The data will remain accessible and will be released ahead of the October meeting. I suppose that is truly what holds significance. Prior to the jobs report scheduled for Friday, market participants will receive data on job openings, private payrolls, and the ISM manufacturing PMI, among other indicators, to gain additional insights into the state of the U.S. economy.
Recent U.S. economic data has shown resilience, countering expectations for significant Fed rate cuts. Consequently, markets are currently anticipating approximately 40 basis points of easing by December. The Australian dollar was recently observed at $0.6571, reflecting a 0.36% increase, whereas the New Zealand dollar showed a slight rise of 0.26%, reaching $0.5791. The Reserve Bank of Australia is set to announce its rate decision on Tuesday. Anticipations indicate that the central bank will maintain its current stance on interest rates.