The U.S. dollar fell slightly on Monday as growing optimism that the U.S. government shutdown could be coming to an end weighed on the safe-haven asset.
At 9:00 a.m. (Spanish time), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% to 99.370, after posting slight declines last week.
Is the government shutdown coming to an end?
News that the U.S. Senate voted to move forward with a measure that could fund the U.S. government through January has boosted risk appetite, as the prolonged shutdown, which entered its 40th day on Sunday, is seen as having a significant economic impact.
On the Polymarket prediction market, the implied probability that the shutdown will end before November 15 rose to 92%.
On Friday, the University of Michigan’s consumer confidence index weakened to its lowest level in nearly three and a half years in early November, while White House economic adviser Kevin Hassett said the US economy could contract in the fourth quarter if the shutdown continued.
“Although some might argue that the end of the shutdown could be a positive boost for risk and negative for the dollar in currency markets, its impact could be more mixed,” ING analysts said in a note.
At the end of last week, the dollar was under pressure due to layoffs and rhetoric that the US economy could contract in the fourth quarter if the shutdown continued. At the same time, Friday’s release of poor US consumer confidence data was interpreted as negative for the dollar. Progress toward ending the shutdown could be felt more in risk-sensitive currency exchange rates than in the dollar.
The euro is trading higher.
In Europe, the EUR/USD gained 0.1% to 1.1579, showing some strength after ECB Vice President Luis de Guindos said in an interview on Monday that the European Central Bank’s interest rates are at the right level barring changes in the economic situation, implying that further cuts are unlikely in the near term.
He said the ECB needed to remain “very prudent and cautious” when setting rates, even though the level of uncertainty, especially after a trade agreement between the European Union and the US, had decreased in the last six months.
GBP/USD rose 0.1% to 1.3178 at the start of a week that includes important economic data from the United Kingdom.
“We continue to believe that the prospects of a 25 basis point cut by the Bank of England in December are underpriced,” ING said. “The market now assigns only a 60% probability to such an outcome. Tomorrow’s release of September wage data will contribute to the BoE’s narrative. These are expected to slow further and give the BoE greater confidence that inflation is less persistent than initially thought.”
Yen falls after Takaichi’s remarks
In Asia, the USD/JPY traded 0.4% higher at 153.98, with the yen struggling after Japanese Prime Minister Sanae Takaichi said on Monday that she would work on setting a new fiscal target that would span several years to allow for more flexible spending, essentially watering down the country’s commitment to fiscal consolidation.
The USD/CNY traded 0.1% lower at 7.1173 after data showed consumer price index inflation rose above expectations in October, while producer price index inflation contracted at a slower pace than expected.
The AUD/USD gained 0.6% to 0.6532, with risk appetite helping the Australian dollar, and the NZD/USD gained 0.3% to 0.5642.
Source: Investing.com
