Euro Rises as Dollar Falls Amid Ongoing Government Shutdown
On Thursday, the euro appreciated against the US dollar, which has continued its decline. As of the latest updates, EUR/USD is hovering around 1.1543, marking a five-day peak after dipping to a three-month low on Wednesday.
The U.S. Dollar Index (DXY), which tracks the dollar’s performance against six major currencies, is approximately at 99.75, retreating from a five-month high achieved the previous day. This drop can be attributed to rising apprehensions regarding the ongoing U.S. government shutdown, which has now extended beyond 35 days, setting a new record.
This shutdown has caused delays in releasing important economic indicators, compelling both investors and policymakers to depend on private sector data to assess economic health.
Adding to the dollar’s difficulties, the latest Challenger Layoffs Report revealed that U.S. companies announced 153,074 job cuts in October—the highest monthly figure seen since 2003. This stark increase contrasts sharply with the ADP report from Wednesday, which noted a rise of 42,000 jobs in U.S. private payrolls in October, indicating mounting pressure in the labor market.
Traders are re-evaluating their expectations regarding the Federal Reserve’s monetary policy after last week’s 25 basis point interest rate reduction. Fed Chairman Jerome Powell cautioned that additional rate cuts in December are not a certainty.
Inflation remains above the 2% objective, and the recent mixed labor data from the private sector has dampened investors’ expectations for significant easing. Currently, markets are estimating about a 70% likelihood of another rate cut in December, which is an increase from 64% earlier in the day but down from 94% a week prior, according to the CME Fedwatch tool.
Meanwhile, the euro’s response to weak retail sales data from the eurozone has been muted, as traders maintain their focus on developments related to the U.S. dollar. According to Eurostat, retail sales in September dipped by 0.1% month-over-month, falling short of the anticipated 0.2% rise, with annual growth slowing from 1.6% in August to 1.0%.
