Home Daily Commentaries US Dollar weakens on concerns over prolonged US shutdown.

US Dollar weakens on concerns over prolonged US shutdown.

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Monday 6 October, 2025

Daily Currency Update

The single currencies latest trading range has been extremely tight and has failed so far to capture the most recent recovery in Eurozone-US yield spreads that should have offered considerable fundamental support. Recent data releases show tepid services growth and a softer than expected PPI (Producer Price Index) along with a contraction in France's industrial production figures.


Bank of England Deputy Governor, Sarah Breeden, argued in favour of reducing interest rates, citing economic risks that could bring inflation lower. On the contrary, Clare Lombardelli and MPC member Catherine Mann both warned that recent inflation shocks should not be considered temporary giving markets cause for concern as the BoE Monetary Policy Committee are clearly split on UK interest rate policy.


Federal Reserve Governor, Stephen Miran, doubled down on his belief that the Fed have room to cut their way toward neutral interest rates. Miran reiterated his opinion that Trump's stark anti-immigration policies will entirely alleviate shelter price inflation , a policy approach that Miran has not backed up with any factual evidence. He added that much has changed since last year and interest rate policy should reflect this.

Key Movers

In Europe, an ECB report warns that banks are unprepared for climate shocks and are urging tougher supervision and the capacity to implement swift policy action. The most urgent concern raised is the data gap which blinds banks to their full climate exposure. They lack reliable information on emissions, energy usage and sectoral vulnerabilities in their respective loan books. Climate change represents not only an environmental or political challenge but also a profound financial stability risk.


For the UK, sentiment remains critical as markets await the Governments fiscal plans ahead of the November 26th budget. The options market is still pricing in a relatively high premium for protection against Sterling weakness, offering some scope for the Pound to rally if Chancellor Reeves can maintain support. Last week saw a rather tepid Purchasing Managers Index which was revised down to 50.8 from 51.9 which further dented the Pounds strength.


Federal Reserve Vice President, Phillip Jefferson, acknowledged that ongoing risks to both sides of the Fed's policy mandates are increasing. The labour market is showing fresh weakness, while inflation pressures continue to mount in underlying datasets leaving the Fed in a tricky position while setting interest rate policy. Jefferson added that long-term inflation is anchored at 2.0%.

Expected Ranges

  • GBP/USD: 1.3425 - 1.3475 ▲
  • GBP/EUR: 1.1470 - 1.1520 ▲
  • GBP/AUD: 2.0315 - 2.0385 ▲
  • EUR/USD: 1.1680 - 1.1730 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.