GBP/USD falls as the Dollar strengthens, before UK data and Fed speeches.

Stalemate in Government Shutdown Affects Currency Fluctuations

The day saw a shift in market trends after President Trump had initially threatened to impose 100% tariffs on Chinese goods last Friday. This came as China retaliated with tariffs on US ships and restricted rare earth exports. However, Trump later reassured everyone on his social media platform, stating that all would be “okay.” He also echoed Treasury Secretary Bessent’s remarks about an upcoming meeting between the US and Chinese presidents in South Korea later this month.

As the geopolitical tensions eased, the dollar gained ground, reflected by a 0.40% rise in the US dollar index (DXY), which now stands at 99.24. This index measures the dollar’s performance against a basket of six other currencies, including the pound.

The ongoing US government shutdown has entered its 13th day, prompting traders to anticipate a resolution. Attention is also on comments from Fed officials. Philadelphia Fed’s Anna Pausol offered a dovish outlook, suggesting that the Fed should be more concerned about the labor market’s weaknesses rather than solely focusing on inflation. He expressed a belief that the current policy is suitably restrictive and advocated for gradual rate cuts in the near future.

Upcoming UK reports are expected to reveal employment data. The ILO unemployment rate for the three months leading up to September is projected to remain steady at 4.7%, with average earnings, both including and excluding bonuses, also expected to hold steady. August saw an employment change of 232,000.

Traders are also keeping an eye out for remarks from Bank of England MPC member Alan Taylor and Governor Andrew Bailey. On the US side, the economic calendar includes speeches from Fed Chair Michelle Bowman and Christopher Waller, who have adopted a dovish stance since mid-July. Boston Fed’s Susan Collins will also be making comments.