The U.S. Dollar (USD) gained strength against major currencies on Monday, while gold prices continued their parabolic rise, inching closer to the historic $4,000 per ounce mark. Meanwhile, S&P 500 futures remained flat after the index touched a new record high yesterday, signaling mixed sentiment across financial markets, according to BBH FX analysts.
U.S. Government Shutdown Extends to Day Seven
The ongoing U.S. government shutdown has now entered its seventh consecutive day, with no signs of a political resolution in sight. Efforts to reopen the government failed once again, as the latest Senate votes fell short of the required 60-vote threshold.
Economists warn that the longer the shutdown persists, the higher the downside risks to the labor market. The White House has even raised concerns about a potential permanent reduction in the federal workforce, which could have lasting implications for the economy’s recovery momentum.
Hawkish Fed Remarks Support the Dollar
Adding to the market’s volatility, Kansas City Fed President Jeff Schmid, a 2025 FOMC voter, delivered hawkish comments, emphasizing that the current monetary stance remains “only slightly restrictive.” Schmid noted that while inflation remains above target, the labor market’s cooling trend supports the Fed’s path toward restoring price stability around 2%.
More Fed officials are scheduled to speak today, including Bostic (non-voter), Bowman, Miran, and Kashkari (2026 voter). Investors will closely monitor their remarks for further clues on the direction of monetary policy.
Market Expectations and Outlook
Despite the recent USD strength, Fed funds futures continue to price in roughly 50 basis points of rate cuts by the end of the year, aligning with the FOMC’s median projection of a 3.50–3.75% target range.
Analysts anticipate the Federal Reserve will adopt a more dovish stance by the December meeting, as persistently tight monetary conditions risk worsening the fragile employment situation. Moreover, upside risks to inflation appear limited, which could give the Fed more flexibility to ease policy.
Bottom Line
While the U.S. Dollar has regained short-term strength, the broader downtrend remains intact. If the government shutdown continues and labor market weakness deepens, the market could see renewed pressure on the USD, while gold may continue its upward trajectory toward $4,000, supported by safe-haven demand.
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