The U.S. dollar traded slightly higher on Tuesday, supported by optimism that Washington is nearing an agreement to end the country’s longest-ever government shutdown. Meanwhile, the British pound fell after data showed a slowdown in U.K. wage growth, reinforcing expectations for a Bank of England rate cut next month.
At 04:10 ET (09:10 GMT), the U.S. Dollar Index (DXY) edged up 0.1% to 99.58, reflecting a modest rebound amid improved market sentiment.
Dollar Holds Firm as Shutdown Resolution Nears
The greenback firmed after the U.S. Senate late Tuesday passed a bill to restore government funding, signaling the potential conclusion of the prolonged federal shutdown.
The legislation now moves to the House of Representatives, where Speaker Mike Johnson indicated he aims to secure swift approval and forward the measure to President Donald Trump for signing into law.
“The reopening of the government has sparked a classic risk-on tone in the FX market,” analysts at ING noted. “High-beta currencies like the Australian and New Zealand dollars are leading gains alongside equities, while the yen remains under pressure.”
So far, the dollar’s overall response has been muted — a pattern consistent with its reaction when the shutdown first began in October.
An official resolution would also pave the way for the release of delayed U.S. economic data, offering traders fresh insights into the health of the world’s largest economy.
Recent figures already hint at slowing momentum: the University of Michigan’s consumer sentiment index fell to its weakest level in nearly 3½ years in early November, strengthening the case for another Federal Reserve rate cut in December.
Sterling Falls as Labor Market Weakens
In Europe, GBP/USD slipped 0.4% to 1.3124 after U.K. labor data showed cooling wage growth and rising unemployment.
The unemployment rate climbed to 5.0% in the third quarter, up from 4.8%, marking the highest reading since early 2021. Average earnings excluding bonuses slowed to 4.6% year-on-year in the three months to September.
“These aren’t extremely dovish numbers, but they do reinforce the gradual softening in rate expectations,” ING said. “With both inflation and employment trending lower — and with the Autumn Budget introducing new tax pressures — the case for a December BoE rate cut is gaining traction.”
The EUR/USD pair remained steady at 1.1556, with traders awaiting the latest ZEW economic sentiment survey from Germany. ING analysts expect the pair to hold near 1.150–1.160, citing limited volatility in the near term.
Yen Weakens to Nine-Month Low
In Asia, the USD/JPY pair traded 0.1% higher at 154.30, with the yen hovering near a nine-month low as investors embraced riskier assets amid optimism over the U.S. fiscal outlook.
The Japanese currency also softened after new Prime Minister Sanae Takaichi signaled that policymakers should take a cautious approach toward future rate hikes.
Elsewhere, USD/CNY edged up to 7.1207, as the yuan continued to face pressure from persistent worries about China’s slowing growth. October’s modest inflation uptick did little to lift sentiment.
Meanwhile, AUD/USD fell 0.2% to 0.6524, retracing part of its earlier rally that followed the U.S. Senate’s breakthrough funding vote on Sunday.