The U.S. dollar edged lower on Monday amid investor caution over a potential federal government shutdown, alongside anticipation of key economic reports later this week.
By 05:35 ET (09:35 GMT), the U.S. dollar index, which tracks the currency against a basket of major peers, had slipped 0.2% to 97.92.
Attention is now focused on Friday’s release of September’s nonfarm payrolls report, which could provide a clearer picture of the U.S. labor market.
Federal Reserve officials have highlighted the importance of a cooling labor market. Earlier this month, the central bank cut interest rates by 25 basis points, signaling that addressing a slowing employment trend is currently more urgent than tackling persistent inflation pressures.
A range of Fed rate projections suggests many policymakers anticipate additional cuts before the end of the year. In theory, lowering rates can encourage investment and hiring, though it may also raise prices.
Economists expect the U.S. added 51,000 jobs in September, compared with 22,000 in August, while the unemployment rate is forecast to remain steady at 4.3%. Some analysts suggest that, given elevated inflation, a strong jobs report could lead the Fed to implement further rate cuts more gradually.
Traders currently factor in roughly 40 basis points of Fed easing by year-end, slightly below previous expectations, which helped lift 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 his colleagues to skip a reduction at the meeting, according to Vital Knowledge analysts.
Still, concerns persist that a U.S. government shutdown could delay the jobs report. Congress faces a fast-approaching deadline to approve a stopgap funding bill before the fiscal year ends on Tuesday. Failure to pass it would mark the 15th partial shutdown since 1981.
While Republicans control both chambers, some Democratic votes are needed to pass the legislation. Democrats have rejected short-term funding proposals, demanding that any new bill reverse recent Republican cuts to healthcare programs.
Leaders from both parties are scheduled to meet President Donald Trump at the White House on Monday. Speaking to Reuters over the weekend, Trump said he has “the impression” that Democrats may want to reach an agreement.
In addition, analysts are watching a legal dispute over the potential removal of Fed Governor Lisa Cook by the Trump administration, a situation that has fueled further concern about the central bank’s independence.
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