The USDX is struggling to gain firm direction on Thursday, trading in a narrow band around the 97.70-97.75 area. The index remains vulnerable, reflecting a loss of around 0.4% so far this week, amidst pervasive dovish expectations from the Federal Reserve and the continued pressure from the partial US government shutdown. Recent disappointing economic data has reinforced market bets for two more rate cuts from the Fed this year (in October and December). The ADP report showed private companies shed 32K jobs in September, the biggest drop since March 2023, with the August figure also seeing a sharp downward revision. This negative sentiment was not offset by the ISM PMI, which, despite improving slightly to 49.1 from 48.7, still signaled the seventh consecutive month of contraction in manufacturing activity.
The US government shutdown began after President Donald Trump's Republican Party failed to agree on a spending bill. A key immediate effect will likely be a delay in the release of major US macro data, including Friday's highly anticipated Nonfarm Payrolls (NFP) report. Consequently, the USD is now heavily reliant on speeches from influential FOMC members scheduled later in the North American session for any fresh impetus.
The main US equity indices moved higher for the fourth consecutive session, with the S&P 500 closing at a record high. The session was primarily driven by strength in healthcare stocks, on hopes of favorable regulatory developments, and continued upward momentum in the technology sector, fueled by lingering optimism over artificial intelligence. Despite the ongoing US government shutdown, investors largely looked past the political impasse.
The highly anticipated Nonfarm Payrolls report is likely delayed this week due to the shutdown, prompting investors to turn to other labor market indicators. The softer-than-expected ADP payrolls data indicated sustained weakness in the labor market, a trend that may be exacerbated by the furloughing of government workers. Separately, PMI data confirmed that US manufacturing activity remained in contraction through September. Among individual stocks, Tesla surged 3.3%, extending its recent strength. However, Netflix was a notable outlier, declining 2.29% after CEO Elon Musk encouraged his social media followers to cancel their subscriptions. Historically, the longest prior shutdown (2018-2019) was estimated to have cost the economy about $11 billion.
Asian stocks advanced on Thursday (as of 06:40 AM GMT), tracking the overnight strength in Wall Street. Trading volumes across the region, however, remained muted due to the week-long National Day holiday in mainland China. Chinese indices were modestly higher, with the China SSE advancing 0.46% and the China SZSE gaining 0.37%. The Hong Kong 50 rallied a strong 2.14%, buoyed significantly by gains in the technology and electric vehicle sectors. Regional chipmaker strength was notable, with Taiwan Semiconductor Manufacturing Company Limited climbing 3.31% on Wednesday. In the electric vehicle sector, NIO Inc surged 4.5% after logging record-high deliveries, and BYD rose 3.53%.
Japanese indices showed mixed performance: the Japan 225 added 0.3% on strength in technology, while the Japan 100 fell 0.1%. Japanese chipmaking stocks were notably strong, with Advantest Corp. rising 1.8% and Tokyo Electron Ltd. climbing 7.51%. This regional technology optimism aligns with the performance of US market leaders, including NVIDIA Corporation, as investor focus now turns to the highly anticipated Q3 delivery figures from Tesla Inc due later on Thursday.
EUR/USD
The EUR/USD pair remained flat on Wednesday, as investors digested a disappointing U.S. jobs report while shrugging off the ongoing government shutdown. Market sentiment was shaped by weak private hiring, political uncertainty in Washington, and mixed economic signals from both sides of the Atlantic.
The latest ADP National Employment Change report showed that U.S. private-sector payrolls unexpectedly contracted by 32,000 in September, following August’s downwardly revised loss of 3,000 jobs.
On the manufacturing side, the ISM Manufacturing PMI ticked up slightly to 49.1 in September from 48.7 previously, modestly above forecasts of 49.0. However, the reading still reflected the sector’s seventh consecutive month of contraction.
Meanwhile, the U.S. government shutdown remains unresolved. Vice President JD Bance said he expects the disruption to be temporary, pledging to ensure essential services continue.
In Europe, data was relatively firmer. The HCOB Manufacturing PMI for September edged higher to 49.8, up from 49.5, and in line with expectations. Meanwhile, the Harmonized Index of Consumer Prices (HICP) rose 2.2% year-on-year, up from 2.0% in August, with core HICP steady at 2.3%.
Despite the slightly stronger prints, ECB President Christine Lagarde struck a cautious tone, stating that inflation risks “appear contained in both directions.” Markets therefore expect the central bank to hold policy steady, with no imminent shifts in rates or guidance.
WTI Oil
Oil prices fell for a third straight session on Wednesday, sinking to their lowest levels since early summer as worries over a U.S. government shutdown, rising crude inventories, and expectations of higher OPEC+ supply weighed on sentiment.
Market attention is increasingly focused on OPEC+ policy, with traders bracing for a fresh production increase in November. Sources suggested the group could raise output by as much as 500,000 barrels per day, though OPEC officials dismissed some of the reports as misleading. At the same time, the group’s monitoring panel urged members to improve compliance and compensate for earlier quota breaches.
Adding to bearish momentum, the U.S. Energy Information Administration reported that crude inventories rose by 1.8 million barrels last week, a larger build than anticipated.
Concerns over slowing consumption in the world’s biggest oil markets further pressured prices. In Asia, factory activity contracted across most major economies in September, deepening fears of weaker fuel demand. In the U.S., manufacturing activity showed only marginal improvement, with new orders and hiring subdued.
Meanwhile, geopolitical risks remain in play. Ukrainian drone attacks have disrupted Russian refining capacity, freeing up more crude for export, while Venezuela’s shipments surged to their highest in over three years, highlighting growing supply competition.
US 500
U.S. stocks advanced on Wednesday, with the US 500 closing at an all-time high as investors bet the economic fallout from the government shutdown will be contained and weaker labor data bolstered expectations for further interest rate cuts.
The U.S. entered a government shutdown after the Senate rejected a Republican-backed funding bill, raising concerns over disruptions to federal services and furloughs for thousands of workers. Still, markets appeared largely unfazed, with analysts noting that past shutdowns have had limited long-term impact.
Treasury yields slipped as investors increased bets on more Fed rate cuts. The move followed data showing private-sector employment contracted in September, its sharpest decline in over two years. The figures added urgency to expectations of further policy easing, particularly as the shutdown threatens to delay Friday’s widely watched nonfarm payrolls report.
In corporate news, Nike rose after posting stronger-than-expected quarterly earnings and a surprise revenue gain, signaling early progress in its turnaround strategy despite headwinds in China and tariff pressures.
Intel surged more than 7% on reports the chipmaker is in early talks to manufacture processors for rival AMD, a move seen as potentially transformative for its foundry business.