Insights 
VT 
Economic Impact on DXY The shutdown started on October 1st when Congress couldn’t agree on funding. Over a month later, there’s still no solution in sight, negatively impacting the DXY. Although the Senate hasn’t made progress toward a resolution, the private sector added 42,000 jobs in October, according to ADP Research, exceeding expectations of 25,000. Last week, the Federal Reserve lowered interest rates. Fed Chair Jerome Powell noted only a slight cooling in the job market. Even with the positive job data from October, Fed Governor Stephen Miran suggested that another rate cut might be necessary in December. Traders are watching for speeches from Fed officials on Thursday for more insights. The US Dollar is the most traded currency worldwide, making up over 88% of all global foreign exchange transactions. The Federal Reserve (Fed) affects its value through monetary policy by changing interest rates to manage inflation and employment targets. Quantitative easing (QE) generally weakens the dollar, while quantitative tightening (QT) strengthens it. Due to the extended government shutdown, the US Dollar Index tested the key 100.00 level in October 2025. This political uncertainty has weakened the dollar, leading to a clear bearish sentiment. Traders might see any temporary strength in the dollar as a chance to bet on further declines.
Consequences of the Shutdown The economic impact of the shutdown is becoming evident in the data. The private payroll growth of 42,000 for October was surprisingly weak, indicating a rapid slowdown in the job market. We’ve seen similar situations in the past; the 35-day shutdown from 2018-2019 was estimated by the CBO to have cut GDP by $11 billion, and this shutdown is longer. The Federal Reserve is responding and has already lowered rates twice during this unstable period. With Fed Governor Miran saying policy is still “too restrictive,” the market is anticipating more cuts. Currently, the CME FedWatch Tool indicates an over 85% chance of another rate cut at the December 2025 meeting. In this climate, derivative traders should consider strategies that benefit from a falling dollar and rising volatility. This may include buying put options on the US Dollar Index or call options on currencies like the Euro and Japanese Yen. These options allow traders to gain from dollar weakness while managing potential losses. Looking ahead, it’s important to keep an eye on upcoming speeches from Fed officials and inflation data. The latest Consumer Price Index (CPI) report for October, released just yesterday, showed a rate of 2.1%, slightly below the forecast of 2.2%. This gives more leverage to those favoring a dovish approach. However, any unexpectedly hawkish comments from Fed officials could trigger a quick, temporary rally in the dollar. Create your live VT Markets account and start trading now.
