The U.S. dollar slipped on Friday, extending its weekly losses as disappointing U.S. data reignited concerns about slowing growth while the government shutdown delayed the release of key indicators, including the all-important nonfarm payrolls. The ISM non-manufacturing PMI fell sharply to 50.0 in September, barely signaling expansion and missing expectations. The weaker reading overshadowed a modest uptick in the S&P Global services PMI, reflecting mixed signals for the broader economy. The data vacuum caused by the shutdown made it harder for markets—and the Fed—to gauge underlying momentum, reinforcing bets on rate cuts before year-end.

Fed Speeches Highlight Policy Divide

Federal Reserve officials delivered contrasting remarks that deepened market uncertainty. Dallas Fed’s Lorie Logan reiterated that inflation remains elevated but described policy as only “modestly restrictive,” while Vice Chair Philip Jefferson warned that the labor market could weaken without continued monetary support. By contrast, Governor Stephen Miran said current rates are already “too high,” calling for a faster pivot toward easing. This divergence underscored the Fed’s growing internal split and fueled speculation that the pace of rate cuts will depend heavily on upcoming data once released.

Currencies and Market Moves

The dollar’s retreat was most pronounced against European currencies. EUR/USD climbed toward 1.1740, bolstered by firmer eurozone inflation expectations that backed the ECB’s cautious stance. GBP/USD advanced to 1.35 amid optimism that U.K. inflation has peaked, giving the Bank of England flexibility to adjust policy. Meanwhile, USD/JPY edged higher despite broad dollar softness, with Japan’s upcoming LDP leadership vote viewed as a key influence on BOJ policy direction. The AUD/USD rose modestly, aided by strong metals performance as gold and copper extended gains.

Bonds, Equities, and Commodities

U.S. Treasury yields rose slightly, with a mild steepening of the 2s–10s curve (+2bps to +53.8bps). Equities were resilient, with the S&P 500 finishing up 0.13%, led by tech and consumer discretionary names. In commodities, WTI crude rebounded 0.55% after a 7% weekly drop, gold gained 0.74% on safe-haven demand, and copper jumped 2.84% on supply concerns. The dollar index fell 0.12%, ending a volatile week marked by mixed data and shutdown-induced uncertainty.

Summary:
Friday’s session captured a fragile balance between weak data, divided Fed rhetoric, and resilient risk appetite. With the shutdown curbing data visibility, markets now await clarity from Washington and a return of economic releases to confirm whether U.S. growth is truly faltering—or simply pausing.