Global Markets Dovish Fed Bets Clash with Shutdown Fears

The euro remained under pressure against the US dollar on Thursday, with EUR/USD pair ending the session 0.07%, marking its second consecutive day of losses. The dollar’s strength is being reinforced by ongoing uncertainty around the US government shutdown and the absence of key data releases such as weekly Initial Jobless Claims.

Traders are awaiting the September ISM Services PMI and further remarks from Federal Reserve officials, while the closely watched Nonfarm Payrolls report is likely to be delayed. Despite the political stalemate in Washington, Wall Street remains poised to finish in positive territory.

Dallas Fed President Lorie Logan struck a hawkish tone, stressing that inflation remains above target and is trending upward. She acknowledged risks on both sides of the Fed’s dual mandate but highlighted the cooling labor market.

Markets appear confident the Fed will move to cut rates at its October 29 meeting, with rate-cut odds priced at 98%, according to the CME Fedwatch tool tool.

Bloomberg reported that the US Supreme Court rejected President Donald Trump’s order to remove Federal Reserve Governor Lisa Cook, allowing her to stay in her post at least until January, when the court is set to revisit the case.

Meanwhile in Europe, Eurostat confirmed the unemployment rate rose to 6.3% in August from 6.2% in July, exceeding forecasts. On the policy front, ECB Governing Council member Martins Kazaks reiterated that interest rates are at an “appropriate level” and should remain steady unless new shocks emerge.

Gold prices fell on Thursday, retreating from a record high hit earlier in the session, after Federal Reserve Bank of Dallas President Lorie Logan urged caution on further interest rate cuts.

Logan said the U.S. central bank appropriately took out some insurance against any sharp deterioration in the labor market with its interest-rate cut last month but needs to be "cautious" with any further rate cuts.

Gold, viewed as a safe-haven asset during times of uncertainty, thrives in a low-interest-rate environment.

The shutdown extended to a second day on Thursday, potentially delaying key economic data releases, including the closely watched non-farm payrolls (NFP) report due Friday. The weekly jobless claims report, a key gauge of labor market health that was due on Thursday, was also not released.

Oil prices fell for a fourth consecutive session on Thursday, settling at their lowest levels in four months, as concerns over a looming supply glut weighed on markets ahead of this weekend’s OPEC+ meeting.

Sources familiar with the discussions said OPEC+ may agree to raise production by as much as 500,000 barrels per day in November, three times October’s output increase, as Saudi Arabia looks to reclaim market share.

Data from the U.S. Energy Information Administration this week confirmed rising crude, gasoline, and distillate inventories amid softer refining activity and demand.

Geopolitical risks helped cap losses. The Group of Seven finance ministers pledged new measures to restrict Russian oil sales, while U.S. officials confirmed Washington will provide Ukraine with intelligence to assist in long-range missile strikes on Russian energy infrastructure.

China’s ongoing stockpiling also provided some support, with traders noting continued import strength from the world’s top crude buyer. Meanwhile, the Colonial Pipeline, the largest U.S. fuel conduit, resumed operations after a brief outage caused by unplanned maintenance.

The US 500 notched another record close on Thursday, though gains were limited by ongoing concerns that the US government shutdown may drag on longer than investors had hoped.

Treasury Secretary Scott Bessent warned in a CNBC interview that the shutdown, which began at midnight on Tuesday, could leave a deeper mark on the economy than past episodes. He cautioned that growth, GDP, and working Americans could all take a hit as federal services remain disrupted. The impasse is already delaying key economic reports, including the highly anticipated nonfarm payrolls release due Friday, adding to uncertainty over the labor market outlook.

With official data delayed, investors focused on private reports. Challenger, Gray & Christmas said layoffs fell 37% in September to 54,064, marking a 26% year-on-year decline. A new “real-time” unemployment estimate from the Federal Reserve Bank of Chicago suggested the jobless rate held steady at 4.3% in September.

In corporate news, Tesla shares slipped despite reporting a rebound in third-quarter deliveries, which was described as a strong recovery but cautioned that challenges remain with demand likely to soften once EV tax credits expire.