The U.S. dollar continued its slide Thursday, extending losses into a fourth consecutive session as traders consider the effects of the ongoing U.S. government shutdown and the likelihood of further Federal Reserve rate cuts.
By 04:15 ET (08:15 GMT), the Dollar Index, which tracks the greenback against a basket of six major currencies, fell 0.1% to 97.272, hitting one-week lows after four sessions of declines.
Shutdown Pressures Dollar
The shutdown came after a last-minute Republican-backed spending bill failed to pass the Senate. With political gridlock persisting, investors now anticipate the closure could last longer than initially expected.
Polymarket, a prediction market, suggests the highest probability for a shutdown of one to two weeks, while there is currently a 34% chance of an extended impasse, with over $1.2 million wagered.
Friday’s much-anticipated U.S. nonfarm payrolls report is unlikely to be released as scheduled, shifting attention to Wednesday’s ADP private payrolls report, which showed a surprising decline of 32,000 jobs in September, following a revised fall of 3,000 in August.
This labor weakness raises the possibility of further rate cuts by the Federal Reserve at its remaining 2025 meetings, adding to the reductions seen last month. Fed funds futures now indicate a 99% probability 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 found brief support earlier after the U.S. Supreme Court announced it would hear arguments in January regarding President Trump’s effort to remove Federal Reserve Governor Lisa Cook, allowing her to remain in her role for now.
Euro Strengthens on Geopolitical Support
EUR/USD rose 0.2% to 1.1751, aided by a Wall Street Journal report that the U.S. will supply intelligence to Ukraine for long-range missile operations targeting Russian energy infrastructure, potentially reducing Moscow’s revenue streams.
Eurozone unemployment for August is expected to hold steady at 6.2%, while inflation ticked up to 2.2% from 2% in the previous month, suggesting the European Central Bank will maintain a cautious approach at its next meeting.
GBP/USD edged up 0.1% to 1.3497 as the pound benefited from the dollar’s ongoing weakness.
Other Major Currencies
USD/JPY was largely unchanged at 147.01 after four sessions of losses. Analysts at ING previously noted, “the yen could emerge as an outperformer as a hedge to the U.S. entering a government shutdown.”
AUD/USD climbed 0.2% to 0.6625 after Australian household spending data for August showed only modest growth, with goods purchases declining.
USD/CNY traded near 7.1196 ahead of an expected meeting in four weeks between Chinese President Xi Jinping and U.S. President Trump. Chinese markets remain closed for Golden Week.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.