All eyes on Washington DC
The US dollar weakened across markets overnight as the clock ticked toward a looming government shutdown. US lawmakers appear unlikely to reach an agreement before the deadline of midnight Tuesday US time (2:00pm Wednesday AEST).
President Donald Trump remained defiant, stating that “a lot of good” could come from a shutdown.
Historically, the US dollar has been moderately impacted by government shutdowns, typically weakening at the onset. During the 2013 shutdown under President Obama, the dollar was slightly weaker overall, with volatility marked by a mid-shutdown rally followed by a sharp drop once a deal was reached.
In the 2018–19 shutdown, under President Trump and the longest in US history, the US dollar index fell around 2.0% in the early stages before rebounding quickly once a resolution was found.
Overnight, the Australian dollar was the best performer, rising 0.6% following the Reserve Bank of Australia’s decision. The NZD/USD also gained 0.3%.
In Europe, EUR/USD was mostly flat, while GBP/USD edged up 0.1%.
In Asia, USD/JPY fell 0.5%, while USD/SGD and USD/CNH remained steady.
AUD higher as RBA signals potential rate pause
The Reserve Bank of Australia held rates steady at 3.6%, reflecting a cautiously optimistic domestic outlook. While recent months have shown stabilisation in the private sector and tentative signs of recovery in consumer spending and housing, sentiment data indicates that households and businesses remain sensitive to cost-of-living pressures and global uncertainty.
Inflation, particularly in services, remains sticky, and the RBA continues to flag uncertainty around Q3 inflation. For borrowers and households, the current rate environment still presents budget pressures, though early signs of relief are emerging as real incomes and wealth improve.
Housing sentiment has also benefited from earlier rate cuts.
The Australian dollar has climbed above the 21-day EMA of 0.6582, with momentum suggesting further gains in the near term. Support lies at the 50-day EMA of 0.6554, offering a cushion should sentiment shift.
China’s factory slump drags on
China’s manufacturing sector remained in contraction for a sixth consecutive month, with the official PMI at 49.8 in September – slightly better than expected but still below the 50 threshold. New orders came in at 49.7, and export orders at 47.8, indicating continued weakness despite a slower pace of decline, according to the National Bureau of Statistics.
The data highlights persistent factory struggles through Q3, weighed down by soft domestic demand and ongoing pressure from US tariffs. The services sector offered little relief, with the non-manufacturing PMI slipping to 50.0 from 50.3 – missing forecasts and underscoring the need for stronger policy support. The composite PMI edged up slightly to 50.6 from 50.5.
The next key resistance levels for USD/CNH are the 50-day EMA at 7.1471 and the 100-day EMA at 7.1707. USD buyers may look to take advantage of current levels.
Aussie stronger with RBA due
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 September – 3 October
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
