Market Impact of Government Shutdown - The government shutdown is expected to have a limited economic impact unless it extends for a longer period [2][3] - The underlying trends in the market are likely to continue, with a delay in data reporting and potential volatility in equities and bonds [3][5] US Dollar Outlook - The shutdown is anticipated to contribute to a weaker US dollar, which is seen as the path of least resistance in the coming days and weeks [4][5] - Recent corporate rebalancing flows have shown a tendency for dollar weakness, indicating a long-term reduction in exposure to the dollar [5] Market Reactions to Economic Data - There is a concern that the market may overreact to the ADP employment number due to the absence of other key data points like jobless claims and NFP [6][8] - This overreaction could lead to short-term volatility, but it is not expected to establish new trends [8] Treasury Yields - The US ten-year Treasury yield recently hit an intraday low of 3.98%, but it is not expected to go significantly lower [9][10] - While the shutdown may lead to some short-term Treasury buying, the overall outlook suggests more upside risk for yields rather than downside [10]

Group 1: Dollar Index and Labor Market - The dollar index (DXY00) is down by -0.29% due to speculation of weak US labor market news prompting the Fed to continue cutting interest rates [1] - The upcoming risk of a US government shutdown is negatively impacting market sentiment towards the dollar [1] - The dollar recovered slightly after August pending home sales rose by +4.0% month-over-month, exceeding expectations of +0.4% [2] Group 2: Federal Reserve and Economic Indicators - The September Dallas Fed manufacturing activity survey unexpectedly fell by -6.9 to -8.7, weaker than expectations of an increase to -1.0 [3] - Cleveland Fed President Beth Hammack's hawkish comments suggest inflation will not return to the Fed's 2% objective until late 2027 or early 2028, indicating a need for a restrictive policy stance [3] - Markets are pricing in an 89% chance of a -25 basis point rate cut at the next FOMC meeting on October 28-29 [3] Group 3: Eurozone Economic Performance - The euro (EUR/USD) is up by +0.29% due to dollar weakness and supportive economic news from the Eurozone [4] - The Eurozone's September economic confidence index rose unexpectedly by +0.2 to 95.5, stronger than expectations of 95.3 [5] - ECB Governing Council member Makhlouf stated that the ECB is "near the bottom" of its rate-cutting cycle, indicating a potential end to rate cuts [6] Group 4: Japanese Yen and Bank of Japan - The USD/JPY is down by -0.62%, with a weaker dollar supporting the yen [7] - An upward revision to Japan's July leading index CI to a 4-month high is bullish for the yen [7] - Hawkish comments from BOJ board member Noguchi regarding the need for a BOJ interest rate hike have also contributed to the yen's strength [7]