Government funding will expire at midnight on Tuesday unless Republicans and Democrats agree to a last-minute temporary spending deal, with President Donald Trump and his opponents making little progress at a White House meeting.
The payrolls report, crucial for decision making by policymakers at the Federal Reserve, is scheduled for Friday, and a delay could leave the central bank flying blind on the labour market.
Federal Reserve Bank of New York President John Williams said on Monday that emerging signs of weakness in the labour market drove his support for cutting interest rates at the most recent central bank meeting.
“If a shutdown is brief, the Fed will largely ignore it,” said Elias Haddad, senior markets strategist at Brown Brothers Harriman.
“However, a prolonged shutdown (more than two weeks), increases the downside risk to growth and raises the likelihood of a more accommodative Fed.”
Traders are currently pricing in 42 basis points of Fed easing by December and a total of 104 basis points by the end of 2026, about 25 bps less than levels seen in mid-September.
That could put the dollar in a vulnerable position in the near term, with the broader US currency index, which has dropped 9.7% this year, easing a bit to 97.948 in early Asian hours.
The Euro was flat at $1.17275, while sterling was at $1.3433.
–Reuters–
