Dollar Slips Ahead of Key Reports Amid Looming U.S. Shutdown

As Wall Street braces for a potential U.S. government shutdown, the dollar softened on Monday amid increasing concern and ahead of pivotal economic releases. The clock is ticking: Congress must pass funding before the fiscal year ends Tuesday, or a funding lapse would force parts of the federal government to shut down. Such a disruption could imperil critical data flows, including the nonfarm payrolls report expected later this week.
Although the dollar had rallied in recent sessions amid reduced expectations for rate cuts, that momentum faded early on Monday. The greenback fell roughly 0.4% against the yen, 0.28% versus the euro, and about 0.27% against the pound. The U.S. dollar index lost 0.22%, pulling back from last week’s 0.5% gain. Investors are particularly alert to what comes next: job openings, private sector payrolls, and the ISM manufacturing PMI are all on the docket.
Market watchers caution that should a shutdown occur, the release of Friday’s jobs report could be delayed, complicating the market’s reading of U.S. economic strength. But they generally expect any closure to be brief and manageable, meaning the Federal Reserve’s plans heading into its October meeting would likely remain intact. Ray Attrill, head of FX research at National Australia Bank, put it plainly: “If you don’t get the payrolls number, you can’t really trade it.” Still, the broader assumption is that fallout will be short-lived and data will ultimately be published.
Elsewhere, the Australian and New Zealand dollars gained mild ground as investors parsed central bank signals down under. Australia’s rate decision looms, and with the U.S. dollar under pressure, regional currencies may attract incremental strength. Should U.S. data exceed expectations, it could pressure the Fed toward more hawkish leanings, though the threat of the shutdown looms as a cap on aggressive moves.
This episode highlights how political risk can quickly filter into currency markets. The fact that the dollar relinquished ground ahead of major data releases underscores how markets are pricing in disruption risk. If the shutdown drags on, delays in key economic indicators could inject volatility into forward-looking rates expectations, undermining the clarity investors rely on.
From a broader macro perspective, a shutdown that interrupts the core data calendar puts the Fed in a delicate spot. Without fresh labor market figures, monetary policy decisions will lean more heavily on backward-looking indicators and alternative data sources. In that scenario, markets might assume greater uncertainty, prompting cautious pricing of rate moves. For now, though, most believe Washington will avert extended closure—keeping economic and policy momentum intact in the near term.