Dollar Under Pressure

The dollar extended losses on Tuesday, dragged lower by falling Treasury yields and concerns over a potential U.S. government shutdown. Month-end rebalancing flows added to pressure, pushing the dollar index closer to its 21-day moving average and erasing much of its post-Fed rally. President Trump warned a shutdown was likely, raising the specter of benefit cuts and intensifying political tension.

Data and Fed Outlook

U.S. job openings inched higher in August, but consumer confidence weakened in September, highlighting fragile conditions. Markets now await ADP employment, ISM services, and Friday’s jobs report—though publication could be delayed if a shutdown occurs. Boston Fed’s Susan Collins said she would support more cuts as inflation expectations soften, while Vice Chair Philip Jefferson projected 1.5% growth but stressed labor market risks. These remarks reinforced a data-dependent Fed outlook.

Currency Moves

EUR/USD briefly broke above its 21-day average near 1.1734 but stalled as euro crosses weakened despite firmer German inflation and labor figures. Sterling inched higher yet remained capped below clustered resistance between 1.3465–1.3501. BoE’s Catherine Mann flagged persistent inflation risks, while Deputy Governor Sarah Breeden highlighted two-way risks. USD/JPY slipped further into its cloud, pressured by lower yields, with Japan’s Tankan survey eyed as the next BOJ guidepost.

The Australian dollar outperformed, buoyed by rising gold prices and offshore yuan support ahead of China’s holiday period. Commodity-linked FX broadly benefitted from precious metals strength despite dollar’s prior gains.

Broader Markets

Bond markets saw uneven yields, but the 2s–10s spread steepened by about 3bps to +54.4bps. U.S. equities edged higher, with the S&P 500 up 0.14% on healthcare gains after Trump announced measures to cut medicine costs. Oil fell 1.4% on OPEC+ supply expectations, while gold rose 0.40% to a record and copper eased 0.31%.

Market Close

By New York’s end: EUR/USD +0.12%, GBP/USD +0.12%, AUD/USD +0.59%, USD/JPY -0.49%. The DXY fell 0.13%, underscoring how shutdown risks and data uncertainty are shaping positioning into quarter-end.