USD holds ground as federal government shuts down

What’s happening:-

 The US dollar continued a tepid rise despite the federal government’s partial shutdown.

What happened:-

 The Democrats and Republicans failed to reach a funding agreement on Tuesday.

The US federal government has partially shut down for the first time in around seven years.

Why it matters:-

 The Democrats voted down the Republican bill to extend federal funding for seven more weeks. The Republicans had only 54 seats in the Senate and needed 60 votes to pass the bill.

Why are US markets not affected by the government shutdown

The temporary funding agreement received only 55 votes, with 45 members of the Senate voting against it. With this, the bill failed to pass the legislation. President Donald Trump’s last-minute threats of “cutting vast numbers of people out, cutting things that they like, cutting programs that they like” did not work to move votes from Democrats in favour of the bill.

Democrats were looking to negotiate an extension of health subsidies before US citizens faced premium hikes next year. They had also demanded the Medicaid cuts to be reversed.

The temporary shutdown could lead to thousands of federal employees being laid off. It would also lead to monthly economic data releases being delayed.

The US dollar maintains its gains

The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose 0.03% to 97.81 this morning.

While the US dollar recorded small gains versus most major currencies, the EUR/USD forex pair rose 0.09% to $1.1745.

The US dollar index still ended September down 0.35% and has lost almost 10% year to date.

US dollar

What to watch:-

 Investors will keep an eye on talks related to US government slowdown.

The ISM Manufacturing PMI is scheduled to be released today (1930 UAE Time). The US manufacturing PMI, which had risen to 48.7 in August from 48.0 in July, is expected to improve to 49.0 in September.