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USD Dented, but Not Harmed, by US Government Shutdown - So Far

USD Dented, but Not Harmed, by US Government Shutdown - So Far

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- Traders are largely shrugging off news of the US government shutdown, as political theater and gridlock have become the norm in Washington, D.C. over the past decade.

- Next vote on a bill to end the shutdown will come in the Senate at 12 EST/17 GMT today.

- Retail trader sentiment suggests a tougher trading environment for the US Dollar heading into next week.

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The US Dollar (via DXY Index) gapped lower to start the week as the US federal government shutdown entered day three. However, with various Senators sounding optimistic that a deal could get done soon, there has been very little follow through on the initial weakness seen when FX markets opened up for the week. The next vote on a bill to end the shutdown will come in the Senate at 12 EST/17 GMT today.

Elsewhere, the Euro has been rather quiet this morning with all attention on the United States. The calendar is completely empty on the day, and the news that a German coalition government would be coming together under Chancellor Angela Merkel was already priced in.

The British Pound has enjoyed a bit more liveliness than the Euro this morning, despite an equally quiet economic calendar. Instead, focus is on commentary from French President Emmanuel Macron, who said that the UK could get a special trade deal with the EU post-Brexit. While the official negotiations don't begin in earnest until March, such remarks are a sign that things are moving in the right direction for a 'soft Brexit' for the UK.

Overall, the US Dollar has been dented, but not truly harmed, by the US government shutdown so far. US Treasury yields continue to nudge higher, with the 10-year yield now at its highest level since July 7, 2014. Meanwhile, US equity markets continue to linger near all-time highs (per futures markets) ahead of the implied cash equity open this morning.

As things stand, traders are largely shrugging off news of the US government shutdown, as political theater and gridlock have become the norm in Washington, D.C. over the past decade.

Read more: The Big Question This Week: Is the Euro Too Strong?

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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