USD whipsaws as US government shutdown looms

Last week saw the USD gain ground, only to lose that strength over the weekend as the threat of a US government shutdown looms. The Republican-controlled US Senate is struggling to get the short-term funding bill passed into the House, as Democrats have been demanding that any legislation undo recent Republican cuts to healthcare programs, Reuters reported. Congress needs to get the bill passed before October to avert a government shutdown, a scenario that could lead to the closure of some institutions on Wednesday. As politicians negotiate over funding and spending, the USD is weakening.

GBP: GBP: GBP/EUR has fallen to 3month lows, under 1.1500, having peaked at 1.1650 in late June. GDP data is released on Tuesday, but GBP trades under pressure from a dismal debt outlook and potential interest rates cuts - BoE member Dhingra this morning suggesting swift cuts were needed to support a weak labour market.

USD: This week’s focus will be in the potential government shutdown and the all important employment data on Friday. The USD has been whipsawing around and RedFX customers have taken advantage on recent dips and spikes. GBP/USD at 1.3425 and EUR/USD at 1.1725.

EURO:  ECB member Makhlouf said this morning that the ECB ‘is near the bottom of the easing cycle’, suggesting he will not want to cut rates soon. We have central bank speakers throughout the week which will give more colour, but the EUR has found recent strength from such comments, keeping EUR/USD at 1.1700 - the middle of the 3-month range. This is despite this morning’s dismal confidence data.

AUD: The central bank is expected to hold its Official Cash Rate (OCR) steady at 3.6%, as inflationary pressures in the Australian economy are proving to be persistent. This is supporting the currency, especially in the face of a weaker USD

This weeks data:
Monday:
EU: Confidence data
China: Manufacturing data

Tuesday:
AUD: Interest rate decision & statement
Germany: Inflation data & Retail Sales
GBP: GDP data & central bank speech
EU: Central bank speeches

Wednesday:
EU: Consumer Price data
USD: Manufacturing data

Thursday:
AUD trade balance
CHF: CPI Inflation

Friday:
EU: Central bank speeches
UK: Central bank speeches
USD: Employment data