Dollar Weakens on US Government Shutdown Worries

Economic Indicators - The dollar index (DXY00) fell by -0.12% due to concerns over a potential government shutdown and comments from Fed Vice Chair Philip Jefferson indicating risks of stagflation, alongside a significant drop in the Conference Board US consumer confidence index to a 5-month low of 94.2 [1][3] - The US July S&P composite-20 home price index showed a year-over-year increase of +1.82%, surpassing expectations of +1.55%, although this represents the slowest growth rate in two years [2] - The US September MNI Chicago PMI unexpectedly declined by -0.9 to 40.6, falling short of expectations for an increase to 43.3 [3] Labor Market Insights - The August JOLTS job openings rose by +19,000 to 7.227 million, indicating a stronger labor market than the anticipated 7.200 million [3] - Fed Vice Chair Philip Jefferson noted risks to employment are tilted to the downside, while inflation risks are on the upside, reflecting concerns about the labor market's stability [4] Central Bank Policies - The markets are pricing in a 97% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29, suggesting a shift in Fed policy [4] - The euro gained support from a weaker dollar and stronger-than-expected price pressures in Germany, with the German September CPI rising more than anticipated [5] - Central bank divergence is evident, as the ECB is perceived to be nearing the end of its rate-cut cycle, while the Fed is expected to implement two more rate cuts by the end of the year [6]