The U.S. dollar weakened Thursday, extending a four-day decline as investors weighed the impact of the ongoing U.S. government shutdown and the prospect of further Federal Reserve easing.
At 04:15 ET (08:15 GMT), the Dollar Index, which measures the greenback against six major currencies, slipped 0.1% to 97.272, following a series of losses that pushed it to one-week lows over the past four sessions.
Prolonged Dollar Weakness Likely
The shutdown was triggered after a last-minute spending bill supported by Republicans failed to pass the Senate. With deep political divisions persisting, there is no clear resolution in sight, and the impasse could continue for an extended period.
Polymarket, a betting platform, currently suggests the highest probability for a shutdown lasting one to two weeks, though there is a 34% chance of a longer closure, with more than $1.2 million wagered.
As a result, Friday’s highly anticipated nonfarm payrolls report is unlikely to be released on schedule, heightening the focus on Wednesday’s weak ADP private payrolls data. According to ADP, U.S. private payrolls fell unexpectedly by 32,000 in September, following a downward revision of 3,000 in August.
This slowdown in the labor market increases the possibility of additional Fed rate cuts at the remaining policy meetings this year, following last month’s reduction. Fed funds futures now indicate a 99% likelihood of a 25-basis-point cut later this month, up from 96.2% the previous day, according to CME Group’s FedWatch tool.
The dollar received some support earlier after the U.S. Supreme Court confirmed it will hear arguments in January regarding President Donald Trump’s attempt to remove Federal Reserve Governor Lisa Cook, allowing her to remain in her post for now.
Euro Strengthens on Ukraine Support News
In Europe, EUR/USD climbed 0.2% to 1.1751, bolstered by a Wall Street Journal report that the U.S. will provide intelligence to Ukraine for long-range missile strikes on Russian energy infrastructure, potentially limiting Moscow’s revenue streams.
The latest eurozone unemployment data for August is expected to remain steady at 6.2%, while inflation edged up to 2.2% from 2% in the previous month, suggesting that the European Central Bank will likely maintain its policy stance.
GBP/USD rose 0.1% to 1.3497, with the pound benefiting from the dollar’s softness.
Yen and Other Currencies
USD/JPY remained mostly flat at 147.01 after four consecutive sessions of declines. ING analysts had noted before the shutdown that “the yen could emerge as an outperformer as a hedge to the U.S. entering a government shutdown.”
AUD/USD added 0.2% to 0.6625 after data showed Australian household spending edged up only slightly in August amid a decline in goods purchases.
USD/CNY traded near 7.1196 as markets anticipate a meeting in four weeks between Chinese President Xi Jinping and U.S. President Trump. Chinese markets are closed for the Golden Week holiday.
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