The U.S. dollar weakened on Monday as investors weighed the risk of a federal government shutdown alongside a series of upcoming economic data releases.
By 05:35 ET (09:35 GMT), the U.S. dollar index, which measures the currency against a basket of its peers, was down 0.2% at 97.92.
Market focus is shifting toward the release of September’s nonfarm payrolls report on Friday, which could shed light on the health of the U.S. labor market.
Federal Reserve officials have emphasized supporting a cooling jobs market. When the central bank cut interest rates by 25 basis points earlier this month, policymakers indicated that addressing the slowing employment trend took priority over persistent inflationary pressures.
A survey of Fed rate projections shows many members expect further reductions before year-end. In principle, lower rates can stimulate hiring and investment, though they also carry the risk of increasing prices.
Economists forecast the U.S. added 51,000 jobs in September, compared with 22,000 in August. The unemployment rate is expected to remain at August’s 4.3%. Observers note that given high inflation, a robust employment report could lead the Fed to implement additional rate cuts at a more cautious pace.
Traders are currently pricing in roughly 40 basis points of Fed easing by the end of 2025, slightly below earlier expectations. This modest pullback helped support the dollar last week.
“A jobs number [less than] 75,000 will probably keep the Fed on track for a […] cut [at its next meeting on October 29], but something [greater than] 115K with the core PCE just below 3% could spur” Fed Chair Jerome Powell and colleagues to pause any reduction, analysts at Vital Knowledge noted.
Concerns remain that a potential U.S. government shutdown could delay the jobs report. Congress faces a looming deadline to pass a stopgap funding bill before the fiscal year ends on Tuesday, or the federal government could enter its 15th partial shutdown since 1981.
Republicans currently control both chambers of Congress, but support from some Democrats is required to pass the legislation. Democrats have rejected a short-term funding bill, demanding that any new bill undo recent Republican cuts to healthcare programs.
Leaders from both parties are scheduled to meet with President Donald Trump at the White House on Monday to discuss the issue. Speaking to Reuters over the weekend, Trump said he has “the impression” that Democrats may want to reach an agreement.
Elsewhere, analysts are monitoring a legal dispute over the potential removal of Fed Governor Lisa Cook by the Trump administration, raising further concerns about central bank independence.
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