The dollar declined to approach a one-week low on Thursday as traders assessed the implications of a potential U.S. government shutdown, while disappointing jobs data heightened expectations that the Federal Reserve will implement two additional interest rate cuts this year. The dollar index, which gauges the performance of the greenback relative to a basket of six currencies, experienced a decline of 0.2%, settling at 97.52.

Following four consecutive days of declines for the dollar, market participants were assessing the potential duration of the U.S. government shutdown, its impact on upcoming economic data releases, and the implications for the Federal Reserve’s decision-making process. The ADP National Employment Report released on Wednesday indicated that U.S. private employment decreased by 32,000 jobs last month, following a downward revision of a 3,000 job decline in August. According to a survey, economists had projected a rise in private employment by 50,000.
“U.S. ADP employment data triggered dollar weakness,” stated Kit Juckes. “The market appeared to respond positively to yesterday’s figures; however, there is a reluctance to push the dollar significantly based on less reliable data,” he stated.

The jobs report was released during a U.S. government shutdown, which has halted the dissemination of federal economic data at a time characterized by uncertainty and division among policymakers. The Trump administration on Wednesday implemented a freeze on $26 billion allocated for Democratic-leaning states, executing a strategy to leverage the shutdown against Democratic priorities. “With numerous significant U.S. data releases postponed because of the government shutdown, alternative indicators are poised to exert a more enduring influence on markets than typically observed,” stated Francesco Pesole. Data released on Wednesday indicated that U.S. manufacturing activity experienced a slight increase in September; however, new orders and employment remained muted as factories dealt with the repercussions of President Donald Trump’s extensive tariffs.

Currently, the U.S. Supreme Court has announced it will hear arguments in January regarding Trump’s effort to remove Fed Governor Lisa Cook. Market participants are anticipating two additional cuts to the Federal Reserve’s interest rates within this calendar year. In other markets, the euro appreciated by 0.2% to $1.1756 following the release of data on Wednesday indicating that inflation in the euro zone increased last month, driven by rising services prices and a less significant drop in energy costs. This development is expected to strengthen expectations that the European Central Bank will maintain interest rates at their current levels for the foreseeable future. “Data is supporting the ECB’s cautious approach, and may silence the dovish voices within the governing council,” Pesole stated. The U.S. is set to supply Ukraine with intelligence aimed at facilitating long-range missile strikes on Russia’s energy infrastructure.