The U.S. Dollar Index (DXY) is weakening after three consecutive days of gains amid the ongoing U.S. federal government shutdown.
The U.S. government shutdown has entered its 22nd day, and on Monday, the Senate failed for the 11th time to advance a bill passed by the House of Representatives to fund the government and end the ongoing closure. The 50–43 vote largely fell along party lines.
The failure of Congress to pass a funding bill could undermine investor confidence in U.S. economic management and cause the U.S. dollar to lose value against its rivals. In addition, the release of key economic data from the Bureau of Labor Statistics and the Census Bureau has been suspended, complicating the Federal Reserve’s (Fed) decision-making process.
Fed funds futures are currently pricing in a 98.9% probability of a 25-basis-point rate cut at the central bank’s October 29 meeting, down from 99.4% yesterday, according to the CME FedWatch tool.
Meanwhile, positive developments surrounding U.S.-China relations may help limit DXY’s losses. U.S. President Donald Trump said late Tuesday that the upcoming meeting with his Chinese counterpart, Xi Jinping, is expected to result in a “good deal” on trade. However, Trump also acknowledged that the anticipated talks might not take place.
U.S. Treasury Secretary Scott Bessent is scheduled to meet with his Chinese counterparts to discuss easing trade tensions ahead of the U.S.-China trade negotiations.
