USD Slips as U.S. Government Shutdown Begins

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3800-1.4050

Euro                 1.6220-1.6470

Sterling            1.6850-1.8900

WTI Oil (opening level) $62.07

The CAD/USD is opening at 1.3931 ( 0.7178 )

The US government has officially shutdown. USD and US equity futures are down. If the shutdown is brief, the Fed will ignore it. However, a prolong shutdown (more than two weeks), increases the downside risk to growth and raises the likelihood of a more accommodative Fed. That can further weigh on USD

The last shutdown lasted 34 days between December 2018 and January 2019. During this period, USD was marginally weaker, S&P500 rallied, and 10-year Treasuries were firm. The Congressional Budget Office estimate the 2018-2019 shutdown to have decreased the level of real GDP in Q1 2019 by 0.2%, which was mostly made up in subsequent quarters. The current shutdown means the release of key economic reports like Friday’s September non-farm payrolls print are on hold. The postponement of labor market data muddies the water for the Fed, depriving it of an important indicator for tracking downside risk to the economy at present

Headlines

·    The US government is heading towards a shutdown as Democrats stopped a Republican stopgap funding package on a confrontation over health-care spending. As many as 750,000 federal workers could be temporarily furloughed, even if Trump doesn’t proceed with permanent dismissals, the nonpartisan Congressional Budget Office estimated.

·    Japan's Q3 Tankan Survey out overnight showed manufacturing improving for a second quarter and capex plans surprised on the upside, while services stayed very strong—netting a solid report that keeps BOJ October hike odds alive.

·    US job openings rose by 19,000 to 7.227 million in August 2025, matching expectations. Gains occurred in health care, hospitality, and retail, while construction and federal positions decreased. Openings increased in the South and Midwest but fell in the Northeast and West. Hires and separations remained stable at 5.1 million.

·    US consumer confidence fell in September to a five-month low amid rising concerns over jobs and the economy. The Conference Board index dropped 3.6 points to 94.2, below the 96 consensus. The present situation measure fell 7 points to a one-year low, while six-month expectations also declined.

·    In July 2025, the S&P CoreLogic Case-Shiller 20-City Home Price Index rose 1.8% year-on-year, marking the smallest increase since July 2023, after a 2.2% rise in June, and surpassing the 1.6% forecast. New York led with a 6.4% gain, followed by Chicago (6.2%) and Cleveland (4.5%), with Boston and Detroit also seeing solid increases.

·    Germany’s annual inflation rate increased to 2.4% in September 2025, up from 2.2% in August and above the 2.3% forecast. This is the highest rate this year, with prices for goods and services accelerating. Energy and food inflation eased slightly, while core inflation rose to 2.8%. Monthly consumer prices rose by 0.2%, with the EU-harmonised CPI also increasing by 2.4% year-on-year and 0.2% month-on-month.

Key Points

·    Equities: A positive close yesterday in US, but futures lower overnight on US government shutdown.

·    Volatility: Mildly higher yesterday and rising overnight as US equity futures trad lower

·    Digital Assets: Bitcoin steady , while Ethereum has chopped a bit lower.

·    Currencies: US dollar weakens slightly against JPY and EUR. AUD lower.

·    Commodities: Corn slumps on bulging stocks. Gold hit fresh record following short-lived correction

·    Fixed Income: Japan’s short yields reach new cycle high on Tankan survey, US yields unchanged as US government set to shut down