Dollar pressured by weak jobs data

The US dollar index hovered around 99.5 on Wednesday, holding onto losses from the previous session as fresh signs of labor market weakness strengthened expectations for a near-term Federal Reserve rate cut.

According to ADP’s high-frequency employment data, private employers shed an average of 11,250 jobs per week in the four weeks to October 25, signaling continued softening in the job market amid sluggish business investment and weaker consumer sentiment.

The data added to concerns about the health of the broader US economy, particularly as the ongoing government shutdown has delayed the release of key official labor statistics, leaving investors reliant on private indicators for guidance.

Market participants now assign about a 68% probability of a 25 basis point rate cut in December, up from roughly 62% a day earlier, as traders increasingly anticipate a more dovish stance from the Fed to support slowing growth and offset mounting fiscal uncertainties.

A growing number of analysts also see scope for further easing in early 2026 if economic conditions continue to deteriorate.

At the same time, optimism has grown that the record-long federal shutdown could soon come to an end, with the Republican-controlled House of Representatives expected to pass a temporary funding bill that would restore operations in key departments and agencies.

The potential reopening of the government is viewed as a modest relief for the economy but is unlikely to fully offset the broader drag from reduced public spending and delayed data releases.

In currency markets, the dollar has slipped against the euro, Australian dollar, and New Zealand dollar, reflecting shifting rate expectations and improved risk appetite, while it has firmed slightly against the British pound and Japanese yen as investors weigh regional growth outlooks and relative monetary policy paths.

Overall, sentiment remains cautious, with traders awaiting more definitive signals from upcoming economic data and comments from Federal Reserve officials later this week.