The euro dropped sharply to $1.1548, its lowest level since August 5, following the resignation of French Prime Minister Sebastien Lecornu and his cabinet earlier this week. Ongoing political paralysis has stalled efforts to pass a deficit-reducing budget, weighing on investor sentiment. Market participants now await President Macron’s next appointment, expected within 48 hours. The euro’s weakness added further support to the Dollar Index’s bullish momentum.
Fed Minutes Reveal Divided Views on Future Cuts
Hawkish undertones in the Federal Reserve’s September meeting minutes helped boost the dollar. While officials agreed on the need for rate cuts due to slowing labor market conditions, they remained cautious about inflation, reinforcing a wait-and-see approach. New York Fed President John Williams supported further cuts, citing risks to employment, but traders are scaling back expectations for multiple cuts. CME FedWatch pricing shows a 95% probability of a 25-basis-point cut at the October meeting, but odds for a December cut have eased to 80%.
Treasury Yields Steady as Shutdown Enters Ninth Day
Yields on U.S. Treasurys were little changed, with the 10-year holding at 4.136%. The ongoing U.S. government shutdown, now in its ninth day, is increasingly concerning investors. The IRS furloughed over 34,000 employees this week, and crucial labor market data remains delayed. However, a smooth 10-year bond auction on Wednesday suggests demand for U.S. debt remains intact—for now.
