The U.S. dollar slipped on Wednesday, retreating to a one-week low as concerns mount that an extended U.S. government shutdown could dampen economic growth.
At 04:25 ET (08:25 GMT), the Dollar Index, which measures the greenback against six major currencies, was down 0.2% at 97.275, hitting its lowest level in a week.
U.S. Government Shutdown Casts a Shadow
Much of the U.S. government has ceased operations after an eleventh-hour spending bill, supported by Republicans, failed to pass the Senate, with Democrats continuing to resist.
“There doesn’t appear to be a clear path out of the impasse, and many fear this shutdown could last longer than the budget-related closures of the past given the sharp political differences between the two sides.”
President Donald Trump has already signaled further federal workforce reductions, with more than 150,000 workers set to leave the payroll this week after accepting buyouts, marking the largest exodus in eight decades.
“Investors are fearful that this could be a longer shutdown, which will only weigh further on consumer confidence and job security,” said analysts at ING, in a note.
The shutdown is expected to delay Friday’s highly anticipated nonfarm payrolls report, a key indicator that markets use to assess the likelihood of a Federal Reserve rate cut later this month. In the meantime, the ADP National Employment Report may receive extra scrutiny and is forecasted to show a modest increase of 50,000 private-sector jobs for September.
Euro Gains Ahead of Eurozone Inflation Data
In European trading, EUR/USD rose 0.2% to 1.1757 as investors awaited the eurozone CPI release later in the session, expected to show annual inflation ticking up to 2.2% from 2% previously.
However, the risk remains to the upside following Germany’s higher-than-expected inflation in September, which rose for a second consecutive month, ending the disinflation trend seen over recent months.
“However, we think the U.S. government shutdown and the softer dollar story should dominate today and could be enough to drag EUR/USD to 1.1800/1820,” said ING.
GBP/USD also moved 0.2% higher to 1.3474, as sterling gained after Nationwide Building Society reported that U.K. house prices rose faster than expected last month, climbing 0.5% in September following a 0.1% decline in August. Year-over-year, house prices were up 2.2%, slightly above August’s 2.1% increase, yet still below average wage growth and inflation.
Dollar Weakness Supports Yen
Elsewhere, USD/JPY fell 0.5% to 147.14, with the Japanese yen benefiting from dollar softness. The Bank of Japan’s quarterly “tankan” survey released Wednesday showed improving confidence among large manufacturers for the second consecutive quarter, with companies maintaining positive spending plans.
AUD/USD edged down 0.1% to 0.6607, reversing prior session gains after the Reserve Bank of Australia held interest rates steady. The pause follows three cuts earlier in 2025, as the RBA weighs rising inflation risks against signs of slowing economic momentum.
USD/CNY remained largely unchanged at 7.1196.
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