The U.S. dollar ticked slightly higher on Wednesday, with market activity subdued as traders awaited confirmation of the government’s reopening after the country’s longest-ever federal shutdown.
At 04:40 ET (09:40 GMT), the Dollar Index, which measures the greenback against six major peers, rose 0.2% to 99.470.
Dollar Regains Ground After Labor Data Shock
The greenback clawed back some of its previous session’s losses, following weaker employment figures from ADP, which reported that U.S. firms shed jobs in late October. The data heightened concerns over the labor market’s resilience — a key focus for Federal Reserve officials ahead of next month’s policy meeting.
“The dollar was briefly hit yesterday after private sector payroll firm, ADP, suggested that 11k jobs had been lost per week through October. This report used a different methodology from its recent release, showing +42k jobs created that same month. Yet the dollar did not stay offered for long and has come back a little bid overnight,” analysts at ING noted.
Expectations for a 25-basis-point rate cut at the Fed’s December 10–11 meeting rose to 61.9%, up from 57.8% the previous day, according to the CME FedWatch Tool.
Optimism over a resolution to the U.S. shutdown also lent the dollar some stability. The Senate passed a bill earlier in the week to reopen the government, which now awaits a vote in the House of Representatives.
“If approved, that means the U.S. government can reopen, perhaps on Friday, and that the September NFP jobs report (potentially USD negative) can be released early next week,” ING added.
Euro and Pound Slip as European Data Disappoints
In Europe, the euro edged lower, with EUR/USD down 0.1% to 1.1573 after German inflation eased slightly to 2.3% in October, confirming preliminary figures. In September, harmonized inflation had stood at 2.4% year-on-year.
The British pound also weakened, with GBP/USD falling 0.2% to 1.3124 following softer-than-expected U.K. unemployment data for September. Political uncertainty added to the pressure, amid speculation that Prime Minister Keir Starmer could face a leadership challenge after this month’s budget.
“Even though Starmer’s approval ratings are very poor, his removal would create some doubt about the future of Chancellor Rachel Reeves and add some risk premium to U.K. asset markets,” said ING.
Yen Falls to Nine-Month Low, Aussie Inches Higher
In Asia, the USD/JPY climbed 0.4% to 154.73, with the yen hitting a nine-month low as investors favored risk assets and anticipated looser fiscal policy under new Prime Minister Sanae Takaichi.
“One factor thought to be keeping USD/JPY supported is direct investment into the US. These potential flows have brought USD/JPY to psychological resistance at 155, where Japanese verbal intervention is picking up,” said ING.
Meanwhile, USD/CNY edged slightly higher to 7.1177, while the Australian dollar advanced 0.2% to 0.6538 after a senior Reserve Bank of Australia official noted growing debate over whether the current 3.6% cash rate was sufficiently restrictive to curb inflation.
Overall, the dollar maintained a cautious upward bias, supported by improving risk sentiment and expectations of a near-term end to the U.S. government shutdown.
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