The US Dollar Index (DXY), which gauges the dollar’s value against six major global currencies, was hovering around 98.60 in negative territory during Asian trading on Tuesday. This decline comes amid the ongoing US government shutdown. However, with the US-China trade tensions easing somewhat, there’s a chance the drop in DXY might hit a limit soon.
Rodda commented, “Consequently, the market is beginning to factor in a de-escalation of the situation.” He further mentioned, “But, until there’s a definite announcement regarding a reversal of policies, the markets will likely stay volatile,” according to Kyle Rodda, a market analyst at Capital.com.
The current US federal government shutdown could put pressure on the US dollar compared to its rivals. This shutdown has now stretched into its 21st day, following the failure of senators to resolve a voting deadlock for the 11th time on Monday. It marks the third longest funding shortfall in recent history.
Federal Reserve President Christopher Waller shared that he would agree to another interest rate cut during the Fed’s upcoming meeting, citing mixed opinions on the employment landscape. Meanwhile, St. Louis Fed President Albert Moussallem hinted he might endorse further rate cuts if job risks intensify but inflation stays in check.
New Fed President Stephen Milan expressed last week his support for more substantial rate cuts than some of his peers have suggested for the October meeting. Cautious comments from Fed officials could lead to a short-term weakening of the dollar.
Attention is particularly focused on the US consumer price index (CPI) inflation data for September, due out this Friday, especially given the scarcity of data during the government shutdown. Both headline and core CPI are projected to rise by 3.1% year-over-year in September. If US inflation trends higher than anticipated, it may bolster the dollar in the short run.
