The US Dollar Index (DXY) is trading below the 98.00 level on Friday, pressured by growing expectations of further Federal Reserve (Fed) rate cuts and ongoing concerns over the US government shutdown. During early European hours, the index hovered near 97.90 after modest gains in the previous session. Investors now await the US ISM Services PMI and final S&P Global Services PMI reports later in the day.
Fed rate cut expectations weigh on USD
The Greenback has struggled to maintain momentum as softer US labor market data reinforced the case for monetary easing. According to the CME FedWatch Tool, markets are pricing in a 97% probability of a Fed rate cut in October and a 91% chance of another move in December. The shift in expectations has limited the upside potential of the US Dollar despite a generally cautious risk environment.
Government shutdown extends market uncertainty
The US Dollar is also under pressure from the prolonged government shutdown, which is set to continue into next week. Senate Democrats are expected to reject a GOP-led short-term funding bill once again, while the Senate will likely remain out of session over the weekend. The partial shutdown is raising concerns over delays in the release of critical macroeconomic indicators, including the September Nonfarm Payrolls (NFP) report.
Trump administration weighs taxpayer rebates
Adding to the political backdrop, President Donald Trump said on Thursday that his administration is considering issuing rebate checks worth USD 1,000–2,000 to taxpayers. The proposal would be funded by tariff revenues, which Trump claimed could eventually generate up to USD 1 trillion annually. Treasury Secretary Scott Bessent offered a more conservative outlook, projecting collections above USD 500 billion.
