The U.S. dollar struggled on Friday, trying to bounce back from sharp losses during the week, as investors closely watched cumulative economic data following the reopening of the U.S. government. There’s growing concern over a potential economic slowdown, which is making traders cautious.
Overnight, the dollar slipped further as U.S. stocks and bonds were sold off, and investors reduced their bets on the Federal Reserve cutting interest rates in December. According to Ray Attrill, head of foreign exchange research at National Australia Bank, “There are hints of US selling looming again.” Even expectations that interest rates would stay unchanged weren’t enough to lift the dollar.
Against the euro, the dollar fell to a two-week low before the euro recovered above $1.16, currently trading around $1.1630. The Swiss franc held steady at 0.7933 against the dollar, while the dollar index dropped to 99.27, approaching its lowest level in two weeks. Overall, the dollar is on track for weekly losses of about 0.3 percent.
Markets are also bracing for a weaker than expected inflow of U.S. economic data. Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia, highlighted that reports like the October unemployment data may be delayed due to the government shutdown, which adds uncertainty to monetary policy expectations.
Meanwhile, the British pound fell 0.3 percent to $1.3152, after Prime Minister Keir Starmer and Chancellor Rachel Reeves abandoned plans to raise income taxes, just days ahead of the UK budget announcement on the 26th. This move could influence market expectations and investor sentiment in the U.K.
In short, the global currency market is showing volatility and caution, with investors closely monitoring economic data, central bank moves, and government policy changes. The dollar’s next moves will likely depend heavily on upcoming U.S. economic reports and how the Fed responds.
