The US dollar fell to a near-week low on Thursday, weighed down by the federal government shutdown and weak private employment data. The ADP report showed a 32,000 job loss in September, short of expectations for a 50,000 gain.
The weakness boosted market confidence that the Fed will cut interest rates twice more this year, with expectations for cuts at its October and December meetings high. The dollar index fell 0.14% to 97.59, with the yen the biggest beneficiary.
The government shutdown prevented the release of official data, causing markets to focus more on alternative measures such as ADP and Challenger. While US manufacturing activity rose slightly, new orders and hiring remained weak due to massive tariffs.
The Trump administration added to political tensions by freezing $26 billion for Democratic states, while the Supreme Court is set to hear arguments on Trump’s attempt to remove Fed Governor Lisa Cook in January.
Meanwhile, the euro rose to $1.1751 after eurozone inflation showed an increase in September. The data is expected to strengthen the ECB's case for keeping interest rates on hold, even as the bloc's unemployment rate also rose in August.
