US Dollar Index remains subdued around 98.50 due to government shutdown, Fed rate cut bets
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US Dollar Index declines as the government shutdown has stretched into its 19th day with no resolution in sight.
CME FedWatch Tool shows markets pricing nearly 100% odds of an October rate cut and 96% for December.
President Trump said that tariffs on China may be lowered, but China has to do things for the United States, too.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is retracing its recent gains registered in the previous session and trading around 98.40 during the Asian hours on Monday.
The Greenback weakens due to the ongoing US government shutdown, which has stretched into its 19th day with no resolution in sight, as senators failed for the tenth time to break the impasse during Thursday’s votes. It now stands as the third-longest funding lapse in modern US history.
The US Dollar also faces challenges amid the increased likelihood of further rate cuts by the US Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in nearly a 100% chance of a Fed rate cut in October and a 96% possibility of another reduction in December.
St. Louis Fed President Alberto Musalem spoke at the Institute of International Finance Annual Membership Meeting in Washington, DC, on Friday that he could support a path with another rate cut if more risks to jobs emerge and inflation is contained. Musalem added that the Fed should not be on a preset course and follow a balanced approach.
The easing trade tensions between the United States and China may improve the market sentiment, limiting the downside of the US Dollar. President Donald Trump said over the weekend that he wants China to buy soybeans at least in the amount they were buying before. Trump added that he believes China will make a deal on soybeans. “We can lower what China has to pay in tariffs, but China has to do things for us too,” he added. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to meet in the coming days to ease tensions ahead of a potential meeting between Presidents Trump and Xi later this month.
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