The US federal government is experiencing a partial shutdown as a result of the failure to pass budget appropriations to begin the new fiscal year. The president threatened not only to impose mandatory furloughs on many non-essential government employees, but to dismiss them permanently. It is noted that as of yesterday, nearly 150,000 federal employees had accepted the governments financial settlement offer to terminate their services.

The longest government shutdown in this recurring political drama lasted 35 days during former President Donald Trumps first term. Concerns are rising that this current shutdown could also extend for a long period. In the foreign exchange markets, the US dollar appeared to be moving in a narrow and mixed range, regaining some stability in late European trading after initially facing a wave of selling. The US dollar also shows relative strength against most emerging market currencies.

In contrast, the rise of the Japanese yen, which has been the strongest among G10 currencies in recent days, put pressure on Japanese equities. But other Asia-Pacific markets moved higher, with Australia representing the main exception today, while markets in China and Hong Kong remained closed for the national holiday. In Europe, the Stoxx 600 index rose for the fourth consecutive session, marking its longest winning streak since last May.

US Dollar

After three days of decline, the US dollar index reached the 38.2% retracement level of the rally following the Federal Reserve meeting, at 97.70 points.

The 50% retracement is located near 97.40 points, which the index approached today, while the 61.8% retracement is positioned slightly below 97.15 points. Forecasts suggest that the 97.7097.80 area may form a near-term ceiling for the index. With large parts of the federal government shut down, reliance on private sector data is increasing.

Economic Data

The Mortgage Bankers Association will release its weekly data on mortgage applications, while the final reading of the September manufacturing PMI, the ISM manufacturing index, and auto sales figures will also be released, all from non-governmental sources. Most likely, the private-sector jobs report from ADP is the most important today, as it has proven more accurate in predicting Bureau of Labor Statistics (BLS) results than economists forecasts.

In the first eight months of the year, ADP estimated that the US private sector added an average of 80.4 thousand jobs per month. With revisions, the BLS estimated a closer average of 74 thousand jobs. In 2024, the BLS estimated that the private sector created about 130 thousand jobs per month on average, while ADP estimated the number at more than 144 thousand jobs. Auto sales data are expected to be released gradually throughout the day.

Bloombergs median survey forecast points to an annualized pace of 16.2 million vehicles. As of August, the average stood at 16.26 million, compared to 15.52 million vehicles during the first eight months of 2024.