The US Dollar extended its decline on Wednesday, with the Dollar Index (DXY) slipping 0.2% to 99.4, marking its weakest level since late October. The pullback comes as optimism grows that the historic US government shutdown—which has lasted more than 40 days—may finally be nearing its conclusion.
According to Philip Wee, Senior FX Strategist at DBS Bank, markets are showing early signs of relief as the Senate’s temporary funding bill heads to the House of Representatives for a final vote. “The end of the US government shutdown is in sight,” Wee said. “The bill to fund the government until January 30, 2026, is expected to pass the House as early as today before being sent to President Donald Trump for signing.”
Markets Turn Cautious Ahead of Economic Data
Despite growing optimism, traders are treading carefully ahead of the long-delayed economic data releases that will resume once the government reopens. Many investors worry that the figures could reveal deeper signs of economic slowdown after weeks of halted activity.
“The ADP report has set a cautious tone, showing private employers shedding an average of 11,250 jobs per week in October,” Wee noted. The data reinforced expectations of slowing labor market momentum, fueling speculation that the Federal Reserve may have to cut rates sooner rather than later. Futures markets currently price in about a two-thirds probability of a rate cut at the next FOMC meeting.
Technical Outlook: More Downside Risk for the Dollar
Wee added that if the DXY continues to trade below 99.5, it could “return more of the past month’s gain from 97.5 to 100.4,” signaling further weakness in the short term.
The US Dollar’s decline has provided moderate tailwinds to commodities and risk assets, while gold prices remain firm above the key $4,100 mark amid safe-haven flows.
As investors await the House vote, markets are likely to remain volatile, balancing relief over the end of the shutdown with renewed anxiety over the health of the US economy.
