The U.S. dollar index (DXY) slipped by 0.5% during the week, closing at 97.7, as growing economic uncertainty and a partial government shutdown weighed on investor confidence and GDP output.
The two-week government shutdown — caused by Congress’ failure to pass a budget for the new fiscal year starting October 1 — has disrupted key federal operations, delayed economic data releases, and heightened concerns about labor market weakness.
According to analysts, the shutdown has already reduced U.S. GDP growth by approximately 0.1% per week, as public sector activities grind to a halt. The Bureau of Labor Statistics (BLS) was forced to postpone the September jobs report, leaving investors to rely on weaker private data sources.
Recent indicators show a slowdown in the U.S. economy: ISM services activity stalled unexpectedly, ADP payrolls declined for the second consecutive month, voluntary quits fell according to the JOLTS report, and Challenger job cuts rose.
These developments have strengthened expectations that the Federal Reserve will proceed with further rate cuts despite persistent inflation. Markets are now pricing in at least two additional interest rate reductions before the end of the year.
JP Morgan analysts noted that the suspension of operations at key agencies, including the BLS and the Census Bureau, will delay vital data such as CPI, trade balance, and jobless claims, complicating the Fed’s decision-making process.
Michael Feroli, Chief U.S. Economist at JP Morgan, commented: “For as long as the shutdown persists, the Fed will be flying partially blind. But given the current macro environment, we still expect a rate cut in October.”
Historically, U.S. government shutdowns have had limited long-term effects on the markets, but economists warn that a prolonged impasse could dampen productivity and investor sentiment. “Each week of shutdown subtracts about 0.1% from annualized GDP growth,” Feroli added.
The uncertainty surrounding the labor market and potential job losses among federal workers could also undermine consumer spending, posing an additional risk to economic recovery heading into the final quarter of the year.
 slipped by 0.5% during the week, closing at 97.7, as growing economic uncertainty and a partial government shutdown weighed on investor confidence and GDP output.){kind=link}