FX.co ★ Dollar Heads for Weekly Loss

The dollar index dropped to approximately 98.2 on Friday, poised to mark its most significant weekly decrease since July. This decline was driven by escalating trade tensions between the US and China, the ongoing US government shutdown, and increasing speculation around interest rate cuts by the Federal Reserve. China has accused the US of deliberately inciting fear over potential restrictions on rare earth exports, although it has expressed a willingness to resume trade discussions. Concurrently, the government shutdown, now in its third week, has delayed crucial economic data that could inform policy-making decisions. Federal Reserve Governor Christopher Waller indicated his support on Thursday for another interest rate reduction this month, citing growing risks in the labor market. Additionally, Fed Governor Stephen Miran advocated for a more vigorous easing approach. The Fed’s Beige Book has also pointed to developing economic pressures, such as increasing layoffs and diminished spending among middle- and lower-income households.