NextFin news, The US dollar closed the week notably weaker on November 9, 2025, influenced primarily by two intersecting factors—the Federal Reserve's forward guidance signaling a higher probability of an easing monetary policy move and the persistent US federal government shutdown that has stalled critical economic data dissemination. This decline was observed across major currency pairs, with the US Dollar Index struggling after several weeks of relative strength. The Federal Reserve’s outlook, as indicated by key federal funds futures markets, placed the likelihood of a 25 basis points rate cut in December at around 70%, up from 63% a week prior. Concurrently, the government shutdown, ongoing since early November under President Donald Trump's administration, caused a delay in the release of crucial inflation metrics such as CPI and PPI data, heightening market uncertainties and dampening confidence in near-term US economic visibility.
USD/JPY weakened by approximately 0.38% over the week, while the New Zealand Dollar experienced more pronounced losses due to its own domestic pressures amidst a global risk-off sentiment. The US equity markets exhibited volatility marked by a midweek selloff and a partial recovery on Friday, signaling investor caution in the face of stretched valuations in key sectors like technology driven by artificial intelligence optimism. The shutdown’s impact also extended beyond data voids, contributing to a risk premium as financial markets seek clarity on fiscal policy continuity and debt ceiling negotiations.
Several data points compounded the dollar's softness. Non-farm employment changes exceeded expectations slightly, with a 42,000 jobs increase versus the forecasted 32,000, and a better-than-expected ISM services PMI underscored resilience in the service sector. However, the weaker manufacturing ISM PMI contrasted this strength, reflecting persistent structural challenges within manufacturing activities. Moreover, central banks globally—such as the Bank of England and Reserve Bank of Australia—held interest rates steady, with market participants closely watching for signals affecting currency valuations vis-à-vis the US dollar.
Underlying the dollar's retracement is a complex interplay of factors. The Federal Reserve's tempering from a previously hawkish stance to an accommodative bias suggests a pivot consistent with subdued inflationary pressures and economic growth concerns. Market participants increasingly price in a rate cut as an insurance against global economic headwinds and domestic fiscal uncertainties caused by the shutdown. This anticipatory easing dampens the dollar’s appeal as a high-yielding currency, favoring riskier assets and alternative currencies.
Importantly, the shutdown has obstructed the release of multiple key US economic indicators, creating a data vacuum that amplifies market volatility and complicates policy forecast accuracy. Without fresh inflation and producer price data, analysts and investors face challenges in scoring inflation trajectory and adjusting Fed expectations accordingly. Should the shutdown persist, this opacity could lead to heightened market swings and diminished dollar demand over the medium term as confidence erodes in US fiscal governance.
From a technical perspective, while the US Dollar Index remains above levels seen 13 weeks earlier, the formation of bearish candlestick patterns suggests short-term selling momentum. However, this does not yet negate a potential resumption of a longer-term bullish trend contingent upon resolution in the government impasse and confirming inflation data. Currency pairs like USD/JPY remain range-bound within consolidative triangular patterns, highlighting investor uncertainty around the dollar's directional trajectory.
Looking forward, if the government shutdown extends into late November, markets will likely face ongoing headwinds due to prolonged data suspension, which may invite greater currency market volatility and dampened foreign investment flows into US treasuries. Conversely, a swift resolution to the shutdown coupled with inflation figures that justify the Fed’s cautious stance may reinvigorate the dollar’s appreciation prospects.
Investors should also monitor the evolving geopolitical landscape under President Donald Trump’s administration, which continues to influence tariff policies and international trade relations, factors that indirectly affect the dollar’s strength. The Supreme Court’s pending decisions on tariff-related constitutional authority further inject uncertainty into trade policy expectations.
In summary, the US dollar’s decline in early November 2025 reflects a nuanced recalibration of expectations around US monetary policy and fiscal stability. The interplay of heightened Fed dovish sentiment alongside the US government shutdown has created a temporary setback for the dollar, while broader economic fundamentals exhibit mixed signals. Market participants are best positioned by maintaining vigilance on shutdown developments and forthcoming inflation data, as these will dictate the dollar’s near-term correction or recovery trajectory.
According to DailyForex, this week’s outlook remains contingent on the government shutdown’s resolution and the return of reliable economic data, which will likely trigger increased volatility in USD pairs and equities. The Federal Reserve’s next meeting on December 10, 2025, will be a critical juncture, potentially confirming market pricing of a rate cut that could reshape currency markets ahead of year-end.
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