Dollar Softens as Shutdown Officially Ends; Pound Falls on Weak GDP, Gold Rises on Fed Cut Expectations.
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USD – Slightly softer after Trump signs spending bill to reopen government; focus turns to FOMC speakers and delayed data.
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EUR – Edging higher as USD eases; momentum limited ahead of Fed commentary.
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GBP – Under pressure after GDP contracts; weak data reinforces BoE cut expectations.
USD:
The dollar is marginally weaker this morning after President Donald Trump signed a spending bill late Wednesday to reopen the U.S. government, officially ending the longest shutdown in U.S. history. The resolution has lifted overall market sentiment but trimmed safe-haven demand for the greenback.
Attention now turns to a heavy slate of Federal Reserve speakers later today, which could influence rate expectations. Markets are increasingly pricing in potential rate cuts in early 2026 as growth slows and inflation moderates. Traders are also awaiting clarity from U.S. agencies on when missed economic data from the shutdown period will be released, leaving some uncertainty in the near-term data calendar.
U.S. yields have edged slightly lower, while gold prices have risen, reflecting renewed bets on a more dovish Fed trajectory. The DXY index remains within its recent range but looks slightly heavy ahead of this afternoon’s commentary.
EUR:
The euro is modestly firmer this morning, benefitting from the softer U.S. dollar and improved risk sentiment following the U.S. shutdown resolution. Trading conditions remain thin, with few euro-zone releases this week to provide domestic direction.
The European Central Bank remains on a cautious hold, watching incoming data closely but showing little urgency to adjust policy. The softer USD backdrop has allowed EUR/USD to edge back toward recent highs, though the move remains modest given the euro-zone’s still-muted growth outlook.
If upcoming Fed commentary confirms a dovish tilt, the euro could extend gains modestly; however, any rebound is likely to remain capped by persistent euro-zone growth and inflation headwinds.
GBP:
Sterling is weaker this morning after UK GDP data showed a sharper-than-expected contraction, underscoring the fragile state of the British economy. The decline marks the steepest drop in quarterly output since the pandemic era and has intensified speculation that the Bank of England may move to cut rates sooner than previously anticipated.
The poor GDP print follows this week’s rise in unemployment to 5%, reinforcing a picture of slowing activity and softening labour conditions. GBP/USD has fallen further, though improved global risk sentiment and the weaker dollar have prevented a more aggressive sell-off.
Markets are now looking for confirmation of the BoE’s next policy steps in upcoming speeches, but near-term sentiment remains bearish. Unless domestic data stabilises, the pound is likely to remain under pressure, particularly against the euro and dollar.