Insights 
VT 
The US Dollar Index, which measures the USD against six major currencies, trades around 98.90, indicating slight declines as the US faces a prolonged federal government shutdown. This lapse has entered its 24th day, with a recent GOP-backed stopgap bill failing to pass the Senate, resulting in a 54-46 vote mainly along party lines. This situation affects confidence in US economic governance, impacting the USD’s standing against other currencies.
Market attention is on the US September Consumer Price Index (CPI) report. Economists predict a 0.4% month-over-month increase for the headline CPI, placing the yearly rate at 3.1%. The core CPI, excluding food and energy, is expected to rise by 0.3% monthly and 3.1% annually. A higher-than-expected CPI could potentially strengthen the USD in the short term.
The Federal Reserve’s Moves
The Federal Reserve may reduce interest rates by 25 basis points next week and in December, according to a Reuters poll. The US government shutdown has delayed key economic data releases, and Fed Chairman Jerome Powell has stated the FOMC will seek alternative data sources for decision-making. Quantitative easing by the Fed, done to stimulate the economy by increasing money supply, typically weakens the USD, while quantitative tightening can have the opposite effect.
As of October 24, 2025, we see the US Dollar Index holding strong around the 106.50 level, a significant shift from the market dynamics of the past. The focus is now squarely on the Federal Reserve’s next move, with inflation proving stickier than anticipated even after a long period of tight policy. The latest September 2025 Consumer Price Index (CPI) report showed headline inflation at a resilient 2.8%, keeping pressure on the Fed to maintain its hawkish stance.
We recall a very different environment back in late 2023, when the DXY was trading below 99 and facing downward pressure. That period was marked by a prolonged government shutdown, the second-longest in history at the time, which eroded confidence in US economic management. Paired with widespread market expectations for Fed rate cuts, the dollar struggled to find its footing.
Upcoming Policy Decisions
This history is relevant today as we face another potential government funding lapse with a mid-November deadline approaching. While the Fed is not expected to cut rates this time, a shutdown would still introduce significant volatility and could temporarily weigh on the dollar. Derivative traders should consider hedging against this political risk by looking at options on major currency pairs or volatility indexes.
The Federal Reserve’s upcoming policy meeting in the first week of November is the next major event, where any change in tone will be scrutinized. Before that, we will be watching the October employment data, which could influence the Fed’s decision-making process. Given the current uncertainty, options strategies that profit from increased volatility, such as long straddles on the EUR/USD, could be prudent ahead of these key data releases.
