The dollar fell before the release of US data amid fears of a government shutdown
The US dollar fell slightly in trading on Monday, influenced by the escalation of fears of a government shutdown in the United States ahead of the release of a series of crucial economic data that may determine the course of the Federal Reserve's monetary policy.
What are the motives for the pressure on the currency
The markets are clouded by two main factors that put pressure on the near performance of the dollar:
1. the specter of a government shutdown:
The threat of a shutdown of parts of the US government looms on the horizon starting from Wednesday, in the event that Congress fails to pass a funding bill before the end of the fiscal year the day before.
Not only that, but the shutdown could delay the release of important economic data, most notably the expected non-farm payrolls report on Friday, obscuring investors view of the health of the economy.
2-keep an eye on data and monetary policy:
Investors are waiting for a flood of economic data this week in search of clearer clues about growth and inflation trends.
These data include the vacancy report, employment data in the private sector, and then the Purchasing Managers Index for the services sector from the Institute of supply management (ISM). Taken together, these factors will be pivotal in the timing and magnitude of the Fed's expected rate cut.
Currency movement
These negative emotions were concretely reflected on the performance of currencies against the dollar:
DXY: The dollar index rose 0.22% on Monday to 97.90, after rising 0.5% last week.
JPY: rose by 0.7% against the dollar to 148.50 yen, recording the best performance among major currencies.
Euro: rose by 0.28% to 1.1731 dollars.
GBP: advanced by 0.30% to 1.3440 dollars.
AUD: the Australian dollar rose by 0.35% to 0.6571 US dollars, the Reserve Bank of Australia will announce its decision on interest rates on Tuesday, and the central bank is expected to keep interest rates unchanged.
The future landscape of the dollar
Recent dollar movements show how sensitive it is to political news and economic forecasts.
Adjusting interest expectations: the recent series of strong economic data has led to a sharp decline in interest rate cut expectations.
Currently, traders expect an easing of interest rates by 40 basis points by December, and 110 basis points by the end of 2026.
State of anticipation: the markets are entering a state of suspense, as traders intend to gauge the Fed's reaction to the risks of a government shutdown and upcoming economic data.
Any delay in data due to the shutdown may confuse the timing of monetary policy decisions.
