Fed to stick with 2 rate cuts in 2025 guidance as USD shows resilience to govt shutdown

The dollar has shown some notable resilience to the risks associated with the government shutdown in the past few trading session.

We attribute this to a combination of a) markets believe that the economic hit due to the federal closure will be limited, and b) political developments elsewhere are diverting gaze away from the bickering in Congress.

As the old adage goes, no news is good news, and the lack of additional sub-par domestic data releases due to the shutdown, particularly on the state of the US jobs market, could also be working in favour of the greenback.

As it happens, there were no tier-1 economic data releases scheduled out of the US this week anyway, so the ongoing delays make little difference.

The same cannot be said for next week, however, and it will be interesting to see whether the dollar comes under some selling pressure should the September CPI report (15/10) be postponed.

This is likely according to Polymarket, which now sees a two-in-three chance that the shutdown runs at least past next Wednesday.

We’ll still hear from a handful of Federal Reserve officials in the coming days, including Chair Powell on Thursday, with the FOMC’s latest meeting minutes out on Wednesday.

We see no reason to believe that the Fed won’t stick by its guidance in favour of two further cuts this year.