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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.

Inflation and Sentiment Data Pressure Dollar The dollar weakened Friday after August PCE inflation matched expectations, reducing fears of tariff-driven price shocks. Headline and core PCE rose in line with forecasts, while consumer spending ticked up slightly. However, University of Michigan surveys showed weaker sentiment and sticky inflation expectations. Together, the data supported the case for a dovish Fed stance, pulling the dollar index below its 100-DMA after two days of gains. Fed Officials Tilt Dovish Fed commentary reinforced the shift. Richmond’s Thomas Barkin said unemployment and inflation risks appear balanced, with consumers resilient unless job losses rise sharply. Vice Chair Michelle Bowman struck a firmer dovish tone, calling for decisive cuts to preempt labor weakness. More Fed speeches are scheduled Monday, which could refine market expectations further. Global Policy and Geopolitical Backdrop China’s PBoC pledged to intensify coordination between fiscal and monetary policy, citing external challenges. Meanwhile, President Trump said progress was being made toward ending the Gaza conflict and securing hostage releases, while Israel’s Netanyahu criticized Western backing for Palestinian statehood. These headlines added to broader geopolitical crosscurrents weighing on the dollar. FX Market Moves EUR/USD reclaimed its 55-DMA, testing 1.17, with RSI momentum supporting bulls. GBP/USD rose 0.50%, buoyed by dovish BoE commentary and weaker EUR/GBP flows. USD/JPY slipped toward 149.50 as yields fell, though option positioning above 150 kept volatility risks elevated. AUD/USD climbed above its 55-DMA, supported by firm gold and silver prices. Commodities and Risk Assets Gold hit another record (+0.74%), silver stayed firm, and copper gained 0.21% on softer dollar flows. Oil rose nearly 1% after Ukrainian strikes on Russian energy assets curbed supply. Treasuries steepened modestly, with the 2s–10s spread widening to +53.8 bps, while equities rallied (S&P 500 +0.60%) on broad sector strength. Summary:A steady PCE print, dovish Fed rhetoric, and geopolitical uncertainty left the dollar on the back foot. With risk assets buoyant and havens like gold in demand, traders head into next week watching Fed communication and global developments closely.