Republican-led shutdown: What’s at Stake for the USD?

  • Lawmakers have not reached a deal, and a partial government shutdown is imminent within four days
  • Amid a political deadlock, the strength of the USD is unclear

We are four days away from a potential partial government shutdown, and negotiations among lawmakers have yet to produce a resolution.    

On Monday, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Speaker Mike Johnson, and House Minority Leader Hakeem Jeffries meet in the Oval Office with the president and vice president to negotiate the conditions to keep the government operational beyond March 1.   

Senate Democrats have been expressing frustration, placing blame on House Republicans, particularly criticizing leader Mike Johnson, for the current impasse. Senator Jon Tester, a Montana Democrat, voiced displeasure, stating, “We’re doing this every six months. This is bullsh*t…. we need to do what we were elected to do, fund the government, not shut it down,” in an interview with CNN.   

If no resolution is reached, a partial shutdown is set to commence at 12 a.m. on Saturday.   

Notably, the last time the US government was on the precipice of a shutdown (Sept- Oct 2023), the USD kept strengthening against major partners like the Euro, with the USD being seen as a safe haven play.   

But last year, there were a few other factors that could have been compounding this USD-buying activity, including the US interest-rate differential and comments from some Fed members making it clear that policy won’t be changing anytime soon. This time, it’s maybe not as clear that there are as strong a set of factors pushing for a robust USD.   

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