The U.S. dollar edged lower on Tuesday as investors weighed the risk of a looming government shutdown and the release of important employment statistics.
By 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against six major currencies, fell 0.2% to 97.442.
Shutdown Risks Heighten Market Uncertainty
With lawmakers racing against the clock to pass a short-term funding bill, the possibility of a government shutdown is increasing. Republican and Democratic leaders traded blame after a Monday meeting with President Donald Trump. Vice President JD Vance commented that he now sees the government as “headed to a shutdown.”
“The dollar has suffered from rising risk of a U.S. government shutdown and falling oil prices since the weekend,” noted analysts at ING.
A shutdown could also postpone the release of the all-important nonfarm payrolls data scheduled for Friday. Today’s August JOLTs report, which measures job openings and hiring demand, takes on heightened significance as traders seek insights on the potential for additional interest rate cuts.
“Remember the July issue was bad, with job openings dropping and layoffs accelerating,” ING added. “Today’s numbers can be quite impactful on the dollar, which now has a more balanced positioning and embeds a less pessimistic macro view compared to a couple of weeks ago….this means downside risks for the dollar.”
European Data Supports Euro
EUR/USD climbed 0.2% to 1.1747 after preliminary data indicated inflation increases in four major German states in September. Analysts anticipate a slight rise in harmonized national inflation to 2.2% from 2.1% in August. Germany, as the eurozone’s largest economy, may set the tone for regional inflation trends ahead of full data on Wednesday.
GBP/USD advanced 0.1% to 1.3345, buoyed by UK GDP growth of 0.3% in Q2 and an annual growth revision to 1.4% from 1.2%.
AUD Gains After RBA Decision
AUD/USD rose 0.4% to 0.6606 after the Reserve Bank of Australia kept its cash rate steady at 3.60%, pausing after three cuts earlier this year. Officials indicated they would wait for clearer signals from inflation and labor market data.
USD/JPY slipped 0.5% to 147.92 following reports that Japan’s factory output fell 1.2% in August, marking a second consecutive month of decline, while retail sales fell at the fastest pace in four years.
USD/CNY edged slightly higher to 7.1199 as China reported contracting manufacturing activity for the sixth straight month in September, alongside weakening service sector activity.
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