US Session- Market Drivers: Markets Stunned as US Government Shutdown Weighs on Dollar

Global financial markets are reacting sharply to the ongoing US federal government shutdown, which has reintroduced a significant level of uncertainty. The immediate consequence has been further weakness in the US Dollar (USD), which receded to new multi-day lows as investors assessed the implications of the political impasse.

The US Dollar Index (DXY) fell for a fourth consecutive session, revisiting the 97.50 area as the shutdown cast a pall over the currency. The immediate market impact is a disruption to the economic calendar; the customary weekly Initial Jobless Claims report will not be released, and the status of other key publications like Challenger Job Cuts and Factory Orders remains uncertain. Attention on the central bank front will now turn to a scheduled speech by a key Federal Reserve official.

Major currency pairs saw varied but significant movements:

EUR/USD briefly tested multi-day highs near 1.1780 before the Greenback staged a slight late-session recovery. The pair awaits the Eurozone Unemployment Rate and speeches from two European Central Bank officials.

GBP/USD advanced strongly, managing to breach the 1.3500 level and hitting fresh five-day peaks. The Bank of England is set to release its Decision Maker Panel (DMP) survey.

The Japanese Yen appreciated further, pushing USD/JPY down to new two-week troughs near 146.60. Investors will monitor upcoming figures on Foreign Bond Investment and the domestic Consumer Confidence gauge.

AUD/USD extended its gains, marginally moving above the 0.6600 barrier. Attention will focus on Australia’s Balance of Trade, Household Spending, and the Reserve Bank’s Financial Stability Report.

In the commodities space, WTI crude oil prices retreated further to new five-month lows near $61.40 per barrel. This decline is attributed to persistent market evaluation of OPEC+’s plans to increase output combined with lingering global demand concerns. Conversely, the weakening dollar and declining US yields provided a substantial lift to precious metals. Gold surged to the brink of the $3,900 per troy ounce mark, reaching an all-time high. Silver followed suit, hitting new highs near $48.00 per ounce for the first time since May 2011.