The US Dollar Index, which measures the value of the USD against six major currencies, is currently around 98.90. This slight decline comes as the US government shutdown has entered its 24th day. A recent stopgap bill backed by the GOP was rejected by the Senate, resulting in a vote of 54-46 that followed party lines. This situation is shaking confidence in US economic governance and affecting the USD’s strength compared to other currencies.
Market attention is now on the September Consumer Price Index (CPI) report. Economists expect a monthly rise of 0.4% for the headline CPI, which would place the yearly rate at 3.1%. For the core CPI, excluding food and energy, a monthly increase of 0.3% and a yearly rate of 3.1% are anticipated. If the CPI comes in higher than expected, it could give a short-term boost to the USD.
The Federal Reserve’s Moves
According to a Reuters poll, the Federal Reserve may cut interest rates by 25 basis points next week and again in December. The ongoing US government shutdown has delayed important economic data, and Fed Chairman Jerome Powell has indicated that the FOMC will look for alternative data sources to guide their decisions. Quantitative easing, which increases the money supply to stimulate the economy, usually weakens the USD, while quantitative tightening can strengthen it.
As of October 24, 2025, the US Dollar Index is strong at around 106.50, a stark change from past market conditions. The focus is now on the Federal Reserve’s next actions, as inflation remains stubbornly high even after a long period of tight policy. The latest CPI report for September 2025 showed headline inflation at a robust 2.8%, putting pressure on the Fed to keep its hawkish approach.
Looking back to late 2023, the DXY was trading below 99 and facing downward pressure due to a lengthy government shutdown, which was the second-longest in history at that time. This eroded confidence in US economic management and led to widespread expectations for Fed rate cuts, making it hard for the dollar to stabilize.
Upcoming Policy Decisions
This historical context is important as we face another potential funding lapse, with a mid-November deadline on the horizon. While this time the Fed is not expected to cut rates, a shutdown could still create volatility and pressure the dollar. Traders might consider hedging against this political risk by exploring options on major currency pairs or volatility indexes.
The Federal Reserve’s policy meeting in the first week of November is the next major event to watch. Any shifts in their tone will be closely observed. Before that, we will keep an eye on October employment data, which could impact the Fed’s decisions. Given the current uncertainty, strategies that benefit from increased volatility, like long straddles on the EUR/USD, may be wise ahead of these significant data releases.
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